Wednesday, 13 June 2012.

3 pm

Companies: Executive Remuneration

Question

3.05 pm

Asked By Lord Roberts of Conwy

To ask Her Majesty’s Government whether they will give shareholders in listed companies a binding vote on senior executives’ and directors’ pay and bonuses.

Lord De Mauley: My Lords, the Government have recently consulted on a new model of shareholder voting on directors’ remuneration. This proposes giving the shareholders of quoted companies binding votes on the policy for the remuneration of directors and on exit payments. We are considering the responses and will announce final proposals shortly. These reforms will require primary legislation, and we aim to introduce measures during the Committee stage of the Enterprise and Regulatory Reform Bill in another place.

Lord Roberts of Conwy: My Lords, while I appreciate the Government’s proposals in the enterprise Bill, does my noble friend agree that, even after shareholders are enabled to pass a special resolution on a remuneration report to make it binding rather than advisory, they may still have great difficulties in exercising that power effectively? Should we not have an urgent review of the workings of the remuneration provisions of the Companies Act? Shareholders, especially in big companies, feel increasingly that their interests as owners, and the long-term interests of their companies, are not being given proper priority by top management, which appears to put its own interests first.

Lord De Mauley: Yes, my Lords, there is broad agreement among investors and businesses that the link between top pay and performance has grown weak and that the current pattern of growth in directors’ pay is unsustainable. Binding votes will encourage companies to set out a long-term pay policy that is clearly linked to the company’s strategy. Shareholders have been showing a keen appetite for a challenge on remuneration, and it is important that we give them the tools necessary to keep up this momentum.

Lord Lea of Crondall: My Lords, given that the policy referred to by the noble Lord, Lord Roberts, is viewed with scepticism for the reasons he indicated, is it not time that the leaders of industry and commerce were brought back to planet earth and workers’ representatives put on the boards of British companies and financial institutions, as is the case in successful economies such as Sweden, Germany and Holland?

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Lord De Mauley: My Lords, boards need to change and we are taking measures to promote greater diversity, but we do not believe in mandating that employees should be on boards. We encourage employees to get engaged by taking up their existing rights to information and consultation arrangements.

Lord Tugendhat: My Lords, encouraging as the Minister’s replies are, does he not agree that this matter is now urgent? No doubt he will be aware that last year, the total remuneration of FTSE chief executives increased by a further 10%, on top of the very substantial increases of recent years. That is quite out of line with the performance of share prices, with the economic performance of the country, and with what happens to everybody else. It really is a very urgent matter because capitalism is being brought into disrepute.

Lord De Mauley: My Lords, I am sympathetic to my noble friend’s view. We have to balance that against the fact that, while it is not the Government’s role to micromanage company pay, we have a role to play in addressing what is, as he says, a clear market failure. The culture has to change, too. We are pleased to see institutional investors taking a tougher stance on pay than they have in the past.

Lord Myners: My Lords, following on from the noble Lord, Lord Tugendhat, the report produced by Manifest shows that the average UK chief executive is now paid 240 times the average earnings in this country. This is an outrageous multiple and it simply is not satisfactory for the Government to say that they are considering allowing binding resolutions on an optional basis. The time has come for the Government to get a grip on this issue and to make sure that these excessive acts of greed are stopped.

Lord De Mauley: My Lords, I am not sure what binding votes on an optional basis might mean, but that is not what is proposed.

Lord Forsyth of Drumlean: My Lords, is not one of the difficulties with the Government’s proposals that the people who act for the shareholders are the fund managers and the institutions—as the noble Lord, Lord Myners, is well aware—who are themselves paid huge sums of money, which, unlike with directors of public companies, are not disclosed?

Lord De Mauley: Presumably unless they are quoted, my Lords. Institutional shareholders are showing a great deal more interest in taking action on this than they have previously, and we have every hope that they will take advantage of the tools that we propose to give them.

Lord Borrie: My Lords, what is the Government’s attitude to establishing by law a multiple of the lowest paid in a company or institution beyond which the salary of no other person in the company or institution should go?

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Lord De Mauley: My Lords, we will require companies to give more information about pay. We are not in favour of mandating companies to adopt a standardised set of ratios because they are not always the best measure to compare across companies. Different types of companies have different ratios because of the nature of their businesses. We also know from the United States that it is not helpful to work out the appropriate pay ratio for a UK-listed company whose business is conducted largely overseas. But I hear what the noble Lord says.

Lord Smith of Clifton: My Lords, if the chief executives of corporations do not get it, will the Government consider imposing martial law on the City?

Lord De Mauley: I wish I could think of a quick answer to that, my Lords.

Lord Davies of Coity: My Lords, in answer to the question posed by the noble Lord, Lord Lea, the Minister said there were no plans to have employee representatives on management boards. Fine—but can the Minister tell the House why the Government object to workers’ representatives being on the boards?

Lord De Mauley: My Lords, I am as yet unconvinced that it would contribute to the growth of those companies or of UK plc.

Lord Jones of Birmingham: My Lords, can the Minister explain exactly what a worker is? What is important is that directors on boards are seen to—and do—fulfil a duty to all the stakeholders in a business, including creditors, suppliers, employees and, above all, customers. I would welcome the Minister’s illumination on what constitutes a worker.

Lord De Mauley: I think that the word came from the Opposition rather than myself. We are all workers and I am delighted to have the opportunity to confirm that.

Schools: Nutrition

Question

3.14 pm

Asked by Baroness Jones of Whitchurch

To ask Her Majesty’s Government whether they will enforce nutritional standards for school food in academies and free schools in the light of new evidence that some schools are reintroducing junk food.

The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford): My Lords, we know that nutritious food has positive effects on behaviour and attainment. The evidence indicates that many academies have responded positively to the standards, and some are going beyond them. The quality of food offered in all schools, including academies, has improved, but further improvement is needed. The latest findings from the School Food Trust show no significant difference between the lunch provided by maintained schools and by academies.

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Baroness Jones of Whitchurch: I thank the Minister for that reply. However, at a time of rising childhood obesity, with more than one-third of 11-year-olds now being classified as overweight or obese, with all the associated health problems, is he not shocked by the School Food Trust’s research, which shows that while healthy eating is increasing in maintained schools, nine out of 10 academies are ignoring the nutritional standards introduced by the previous Government and selling crisps, chocolate and cereal bars? Does this not undermine the Government’s faith that academies can be trusted to do the right thing on nutrition? How much worse must the situation get before the Government act? Is not the simplest answer to enforce the nutritional standards in all schools regardless of their status?

Lord Hill of Oareford: My Lords, having looked at all the research and the most recent qualitative survey carried out by the School Food Trust into what is going on in academies, I find it difficult to draw the very clear conclusion that the noble Baroness has come to. The survey concluded that there are maintained schools that are not doing as well as they ought to, there are academies exceeding the standards and there are also academies not doing as well as any of us would like them to do. I agree with her entirely about the importance of decent food in terms of obesity and of concentration in school. The question in my mind is whether the regulatory approach is the necessary way forward. I agree with her that the Government need to reflect on whether there is more that they can do to raise the quality of school food. My right honourable friend the Secretary of State has indicated that that is what he will do.

Baroness Trumpington: My Lords, how would the Minister analyse junk food? Surely he would agree that one man’s junk may be another person’s Ritz-Carlton.

Lord Hill of Oareford: My Lords, when I walk to the department in the morning I pass a number of schools and, sadly, I see children drinking Red Bull and eating crisps for breakfast. I would call that junk food because it is not very healthy or good. There are things we need to do to improve the quality of food. There are many schools doing that, including academies, and that is something that we should encourage.

Lord Morris of Handsworth: My Lords, the consumption of so-called junk food is a clear indication of poverty. What steps are the Government taking to implement the target inherited from the previous Government for ending child poverty?

Lord Hill of Oareford: I am not sure that I agree with the noble Lord’s premise that eating junk food is necessarily an indicator of poverty. It is an indicator of people not being properly educated in the importance of good food and that is something that we need to look at. It can also be an indicator of a number of other things. I know from visiting academies which are dealing with some of the poorest children that they are inculcating extremely good habits of eating with pupils all sitting down together, learning and, I hope,

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building habits for a lifetime. The broader issue of child poverty is clearly important and the Government are working to make further progress on that.

Baroness Parminter:My Lords—

Lord Ramsbotham: My Lords—

Lord Lawson of Blaby: My Lords—

The Lord Bishop of Bath and Wells: My Lords, yesterday I visited one of our schools, which is hoping to become an academy. It has reinstated its kitchen, providing excellent food not only for the school but for those in the locality. I was also involved in a discussion yesterday about the increasing number of young people whose family food is being taken from food banks around our country today. Does the Minister agree that the priority is to ensure that all school food provides adequate nutritional standards in the light of the fact that too many of our most vulnerable people are experiencing a need to get food from food banks in the 21st century?

Lord Hill of Oareford: There were two strands to the right reverend Prelate’s remarks. One was to make the point that in a school which he knows which is hoping to become an academy good work is being done to make sure that the quality of food is good, and I welcome that. On his broader point, standards clearly can play a part in helping to address the concerns that he raises. One of the things that we have discovered is that although standards are in place and the nutritional quality of food has improved, the take-up of that food by children has not increased at the same rate. So better food is available but the children are not always exercising their choice to eat it. One of the challenges for us is to make sure that children understand that eating healthy food is good for them.

Baroness Parminter: My Lords—

Lord Ramsbotham: My Lords—

Lord Strathclyde: My Lords, we have not heard from a Liberal Democrat on this Question. We will hear from the noble Baroness, Lady Parminter, and then from the Cross Benches.

Baroness Parminter: My Lords, with almost 18% of children between two and 15 growing clinically obese in the past decade, can the Minister tell the House what discussions have taken place or are planned to take place with colleagues in the Department of Health to discuss this new evidence from the Government’s own advisers on school food and children’s meals about the potential risks to the life expectancy of children and the increasing costs to the NHS, particularly in the light of the Secretary of State’s own view that the majority of secondary schools will become academies by the end of this Parliament?

Lord Hill of Oareford: I agree about the importance of my department working closely with the Department of Health. We do so. The Department of Health has recently published a new policy tackling that important issue, and we will continue to work closely with it.

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Lord Ramsbotham: My Lords, I declare an interest as the vice-chairman of the Institute for Food, Brain and Behaviour which is currently conducting work in a school in Dagenham replicating work that in young offender institutions reduced the offending rate by 40%. Will the Minister agree to invite the scientists from the Oxford Department of Physiology, Anatomy and Genetics who are conducting this work to talk to his officials about what lessons are learnt from this very important trial which has implications for behaviour as well as for nutrition?

Lord Hill of Oareford: My Lords, I am very grateful for the suggestion. Yes, of course.

Lord Lawson of Blaby: My Lords—

Baroness King of Bow: My Lords—

Lord Strathclyde: My Lords, I know everybody is desperate to get in on this Question, but we are now into the 17th minute and I think we have to go to the next Question. Unfortunately this Question has taken too much time.

Businesses: Tax Liability

Question

3.23 pm

Asked By Lord Kennedy of Southwark

To ask Her Majesty’s Government what is the normal notice period that HM Revenue and Customs gives to businesses in relation to changes in their tax liability.

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, changes in tax law are normally confirmed at least three months before the tax year in which they come into effect or the publication of the Finance Bill in which they are to be included. The Government normally announce such changes at Budget for enactment through the following year’s Finance Bill. The Government also consult on most changes to tax law, unless they are straightforward changes, revenue protection measures or areas where there is a risk of forestalling.

Lord Kennedy of Southwark: On 18 May, HMRC issued new guidance concerning the tax rates to be charged to the waste industry with immediate effect. It resulted in a 2,500% tax increase and put jobs and businesses at risk. I raised it in the House on 29 May. The Government then did a U-turn—the official line was that they clarified their position. The problem is that half the industry does not accept the veracity of the clarification of the Government’s guidance. Does the Minister accept that we have a serious problem and will he agree to facilitate a meeting between me, my good friend the Member of Parliament for Mitcham and Morden and the relevant Treasury Minister with a representative of the industry to sort out this shambles of all shambles?

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Lord Sassoon: My Lords, before I get what I might call my noble friend Lady Trumpington’s question, “What on earth are we talking about?”, it might be helpful to give a little background. Landfill tax is payable by landfill site operators per tonne of waste put into their sites. It is sometimes called by the press “the skip tax”.

Recently HMRC responded to concerns expressed by some landfill operators that certain companies were not paying the correct rate of tax and in that process were disadvantaging those companies that were paying the correct rate of tax. There is no new tax policy here. The rates of landfill tax have not changed, but HMRC issued guidance in response to that request. Since the issuance of that guidance, there has been some misinterpretation which HMRC has sought to correct. I appreciate that there may still be some residual concerns, and I am very happy to facilitate a meeting. Because it is an operational matter, I suggest that the person who it would be most helpful to meet is the director at HMRC who is directly responsible, and I will help to set that up.

Lord Lawson of Blaby: This Question concerns Customs and Excise. Is the Minister aware that a report published by the Institute of Fiscal Studies last year pointed out that, while some unhealthy foods are subject to the standard rate for VAT, there are many other unhealthy foods which are zero-rated? Would he care to suggest to the Chancellor of the Exchequer that no unhealthy foods should be zero-rated? I am sure that the Chancellor could do with the additional revenue.

Lord Sassoon: My Lords, I think that we probably call it Her Majesty’s Revenue and Customs these days. That aside, I will of course pass on my noble friend’s representations on this important matter.

Lord Foulkes of Cumnock: My Lords, will the Minister tell the House whether the decision by Her Majesty’s Revenue and Customs to put Rangers Football Club into liquidation was made by officials or was referred to Ministers?

Lord Sassoon: My Lords, as previously in answer to any football club tax questions, I can say only that I cannot talk about individual taxpayer matters for reasons of confidentiality, which the noble Lord, Lord Foulkes of Cumnock, well knows.

Crime: Victims

Question

3.26 pm

Asked By Lord Laming

To ask Her Majesty’s Government, in the light of responses to their consultation, Getting it right for victims and witnesses, what assessment they have made of the contribution of the central office of Victim Support to supporting victims of crime.

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The Minister of State, Ministry of Justice (Lord McNally): My Lords, we are still consulting on this matter and hope to report the outcome of the consultation as soon as possible.

Lord Laming: My Lords, I am grateful to the Minister for that reply. However, although many of us support the general thrust of the consultation document, especially the point that local services should be shaped to meet the needs of the communities they serve, does the Minister agree that these local services would be more efficient and more effective if they were supported by a strong organisation at the centre that could provide them with advice, help and support? In particular, will Victim Support continue to maintain its services for witnesses and the relatives of victims of homicide?

Lord McNally: Part of the purpose of the consultation is to work out where it is best to keep responsibilities centrally—the noble Lord referred to one such responsibility in the case of homicide—and where they could be devolved locally. I assure him that the Government fully appreciate that Victim Support provides a valuable service. We would be surprised if it did not continue to have an important role, as we have proposed moving to a mixed model of national and local commissioning.

Lord Dholakia: My Lords, I recently chaired a commission from the Magistrates’ Association on the future of summary justice. One of the outcomes of this consultation was the view that victims of crime felt that the system of justice was opaque and seldom provided them with information about the process and the outcome. In light of the consultation process which the Minister has undertaken will he undertake to establish a pilot scheme to see how the local commissioning of victim support schemes might operate and whether it would not be a better option than the current system?

Lord McNally: I am not sure that I can assure my noble friend that we will move to pilot schemes. The plan, after the consultation, is to see which parts of Victim Support should go to local commissioning and which parts should be retained centrally. My noble friend makes the point that many victims complain that they are not kept well enough informed. The Ministry of Justice information site is trying to give a much better ability to follow through on crimes. However, we feel that the current code is very process-oriented and out of date. In the victims and witnesses consultation we are proposing to review and rewrite the code to clarify what victims should expect. I will certainly take on board what my noble friend says about the opinions of the Magistrates’ Association, which I value very highly.

Baroness Howarth of Breckland: My Lords, does the Minister agree that this point is particularly true of children and young people who appear in court as witnesses when they are the victim of crime? Will he look into whether progress is being made on the work done previously? Although that work moved the position forward a long way it seems to have stalled, and children are still being revictimised in court.

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Lord McNally: I will most certainly follow it up. It is very important that children who are caught up in court processes, whether as the accused or as the witness of a crime, are dealt with in a non-damaging way. I am certain that the thrust of policy development seeks to do just that.

Baroness Royall of Blaisdon: Can the Minister assure me that, whatever follows at the end of the consultation, the needs of victims of stalking will be properly taken into account? I met three victims of stalking earlier this week and it was absolutely clear that their needs as victims were never taken into account. I hope that this situation can be improved.

Lord McNally: Again, I certainly take that on board. We are beginning to appreciate more fully just how traumatic it is for an individual to be stalked. I am hopeful that we will be able to treat this as the serious crime that it is, not only in dealing with the perpetrators but in how we support the victims.

Lord Elystan-Morgan: May I invite the Minister to consider a very significant omission in the otherwise excellent consultation document? Is he aware that under Section 130 of the Powers of Criminal Courts (Sentencing) Act 2000 a court is obliged in appropriate cases to grant compensation to the victim of the crime, and that if it does not take that view, it is obliged to certify why that is not being done? Is he satisfied that the fullest use is made of this most significant statutory provision?

Lord McNally: As often with questions from the noble Lord, I am not sure that I am aware of the provision to which he referred. If I understood him correctly, he is saying that courts should sometimes use their discretion not to grant compensation. I think that there have been press reports of compensation paid to people who have been involved in criminal activity—

Lord Elystan-Morgan: I am sorry; perhaps I may explain. I was referring to a situation in which a court feels that a fine is appropriate, all other things being equal, but that the defendant can hardly afford to pay a fine and compensation. The court might decide that, in the circumstances, the public interest is better served by using a compensation order.

Lord McNally: I think that I had better take advice and write to the noble Lord. I can feel the thin ice under me so I will write to him.

The Lord Bishop of Liverpool: My Lords, I know that the Minister recognises that victims often feel overlooked in the criminal justice system. Can he please tell the House whether victims themselves have begun to ask for the decentralisation of this service?

Lord McNally: Yes. A large number of organisations are involved in victim support, and Victim Support—as the title says—is one of the leading ones. At the moment it is in effect a monopoly provider of services, receiving some £38 million of public funds. In this consultation exercise we are looking at whether it

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would be better to commission some of those victim support activities locally, and then we can decide where the dividing line between local and central delivery should be. It is a perfectly legitimate exercise. We have, as I say, completed the consultation, and our response and specific proposals are imminent. I hope that that will inform further debate in this House and elsewhere.

Lord Campbell-Savours: My Lords, do not some of the awards available under the criminal injuries compensation scheme tend to inflate the incidence of false allegations? Would it not be wiser to invest less money in compensation and more in victim support?

Lord McNally: That is exactly what we are doing. We intend to put more into victim support and to focus compensation much more effectively.

Baroness Scotland of Asthal: My Lords, in this new construct that the noble Lord is putting forward, how can we be assured of the quality of the support that is given to victims if it is disaggregated in the way that the Government are contemplating?

Lord McNally: Quality will come partly from local accountability and the fact that support will be devolved to the new police commissioners, who will have responsibility for victims. That is a very healthy development. I do not want the new police and crime commissioners to see their role as second-guessing chief constables. They should have a wider role in their responsibility for police and crime. If victims are high on their list of priorities, the democratic process will ensure service and accountability.

Committee

3.37 pm

“(3) That decision is subject to the referendum condition, within the meaning of section 3 of the European Union Act 2011, being satisfied.”

Lord Foulkes of Cumnock: My Lords, as Members of this House will know, the Queen’s Speech was made here on 9 May and the Second Reading of the Bill came rather quickly after it on 23 May. Therefore, a number of Members who have taken a notable interest in the European Union over several years were unable to change engagements that had already been made to be here and participate at Second Reading. I was certainly one of them. However, I read the proceedings on the Bill and there was one speech with which I concur absolutely—that of my noble friend Lord Radice. Everything that he said was what I would have said, although he put it rather more eloquently, lucidly and intellectually than I could have.

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Several issues that need to be explored arose from consideration of the Bill at Second Reading. Therefore, I tabled two or three amendments, thinking that they would appear on a long Marshalled List. Imagine my surprise when I found that they were the only amendments to the Bill that had been tabled. I wondered what had happened to the usual suspects, notably the UKIP Members, who are never usually at a loss to table reams of amendments and suggestions, and to participate at great length. This could not be more in the mainstream of some of their thinking. However, not only have they not tabled amendments; they are not even here to participate in the debate. I must say that I find that rather strange.

This first amendment proposes that there should be a referendum on the treaty in the United Kingdom. Let me make it absolutely clear that this is a probing amendment—I do not actually agree with it. I put it in to enable a debate to take place, and to contrast the areas in which there will or will not be a referendum because of the provisions of the European Union Act 2011 on this issue. Under Section 4 of that Act there are 13 instances—and we discussed this during the proceedings on that Bill—where referenda would be necessary. The whole of the electorate would be asked to go out to the ballot boxes to cast a ballot on—let us take Section 4(1)(m)—

“any amendment of any of the provisions specified in subsection (3) that removes or amends the provision enabling a member of the Council, in relation to a draft legislative act, to ensure the suspension of the ordinary legislative procedure”.

If that was to happen, we would have a referendum on it. Can you imagine people flocking to the polling stations to take part in that? Yet we have something in this Bill which is a major and very substantive change—as was said in important speeches by former Chancellors at Second Reading—and there is no provision for a referendum. I am not saying that there should be; I am against referenda on all these things. I want to contrast the fact that we would have referenda on all these minor matters but not on this. It seems strange.

I then looked specifically at the basis on which the Government are arguing that there should not be a referendum. The Minister said at Second Reading that the Foreign Secretary had indicated that,

“in his opinion a referendum is not required to give parliamentary approval. … it does not transfer further competence or power to the European Union from the United Kingdom. The statement was open to judicial review, but in the intervening eight months no one has sought to challenge it in the courts”.—[

Official Report

, 23/5/12; col. 802.]

I went back to the Act again to find out why he had given this opinion. Section 2(3) says:

“The exemption condition is that the Act providing for the approval of the treaty states that the treaty does not fall within section 4”.

We therefore look at Section 4, “Cases where treaty or Article 48(6) decision attracts a referendum”, which includes the 13 that I mentioned earlier. Then, that section says:

“A treaty … does not fall within this section merely because it involves one or more of the following”,

and the second of the following three is,

“the making of any provision that applies only to member States other than the United Kingdom”.

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That would seem to me to be open to argument. The inclusion of “merely” implies that there should be something else—that there should be another factor involved in the decision on whether or not there should be a referendum.

I am, therefore, at a loss to understand why this is the case. I hope that the Minister will try further to explain this to the House, as he did briefly at Second Reading, and to convince us that although a referendum would be necessary in all these 13 tiny little areas it would not be necessary in this particular one. I beg to move.

3.45 pm

Lord McAvoy: My Lords, I wish to speak briefly on this issue. My noble friend Lord Foulkes—he may not be my noble friend when I have finished speaking, but there we are—said that he agreed with every word that our noble friend Lord Radice said on Second Reading. I wish to put on record that I did not agree with a single word that my noble friend Lord Radice said in that debate, as he well knows, as the notion that the European Union is some sort of holy grail does not accord with me at all. The speech that most appealed to me in that Second Reading debate was that of the noble Lord, Lord Lamont of Lerwick. Although I do not endorse every single word that he said, nevertheless he very much captured the latent suspicion—however, that may be too strong a word—of the British people towards the European Union.

Naturally, as a loyal party man, I will not support the call for a referendum, which is the basis of this amendment, as that is not Labour Party policy. However, your Lordships’ House would do well to take note of the deep feelings of many people in the United Kingdom against further encroachment into their lives by the European Union. I know that the relevant “holy grail” stipulates that we should all be so-called good Europeans and sign up to everything that comes from Brussels, or wherever else in Europe that the European Union happens to be meeting. However, I take the opposite point of view. I am no history graduate in this regard but, as far as I recall, the 1975 referendum—I was involved in that referendum campaign—sold the European Union to the British people as an economic union and an economic set of circumstances which would help us to retain, or in some cases regain, our place in the industrialised world. However, the giant bureaucracy in Brussels and Strasbourg has encroached on our lives bit by bit. In my opinion that is the main reason why many people in the United Kingdom feel strongly that there should be a referendum.

As I say, unlike my noble friend Lord Foulkes, I do not support the call for a referendum but I would like to take a few more minutes to explain why many people feel that there should be one on anything to do with the European Union. I know that noble Lords dotted all over your Lordships’ House take the exact opposite view and will make faces at me as they walk out of the Chamber because I am saying these things.

Lord Davies of Stamford: My noble friend talked about the giant bureaucracy in Brussels. Is he aware that the European Commission employs fewer people than Strathclyde council, which I think is where he comes from?

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Lord McAvoy: Strathclyde council has a better record of administration than the European Union. I assure my noble friend that it is one of the best administrative councils in the history of Europe as well as being one of the biggest. I declare an interest as a former member of that council although I was not involved in its financial affairs.

In short, there is a certain amount of arrogance—I do not mean this in a hostile way—on the part of pro-European Union people as regards further encroachment on the British way of life and the concept that the intellectual giants are the people who have thought out everything to do with the European Union and its encroachments. That is not the case and those people do not represent the views of the British people. The view of the British people is best represented by those who say, “This far and no further”. Although I do not support the call for a referendum, it is useful for this House to hear a dissident voice on this side of the Chamber. We certainly should be very careful as regards further encroachment.

Lord Stoddart of Swindon: My Lords, I must confess that when I saw these amendments in the name of the noble Lord, Lord Foulkes, I thought that we had a convert. However, my hopes were dashed by his speech this afternoon. It appears that he tabled these amendments as it enabled him to make the speech—it is a very nice way of doing it—that he could not make when we debated this matter on Second Reading. He has a point. The implications of this Bill are much further ranging than has been related to the House. I shall quote from the Timeson 11 May this year, which will support the case—or non-case—that the noble Lord made:

“There are two issues with this EU treaty change that could cause big problems: first, it allows the eurozone to integrate further with consequences for UK interests; second, the quid pro quo guarantee that the UK won’t be forced to contribute to euro bailouts in future may not be legally binding”.

So there is some support in that article for the view that perhaps this Bill is much more important and far-ranging than some of us had believed. I and other people considered whether this Bill could be amended and I came to the conclusion that it was best left to the House of Commons. However, we have an amendment here which I believe should be supported. The Bill is very important indeed, particularly in the light of what is happening at present. The problems of the eurozone and the European Union itself are leading to demands for further integration. Even today, the President of the European Commission, Mr Barroso, is outlining plans to the European Parliament for a European banking union, which would affect not only the eurozone but the whole of the European Union.

Angela Merkel, for example, believes that the answer to the problem is not less but more Europe, politically, financially and economically. This Bill facilitates what these people are thinking. The Bill is much more important than we previously believed and the House should be grateful to the noble Lord, Lord Foulkes. I should really describe him as my noble friend, because we have been around a long time and embarked on many debates. Usually, we have been on the same side. Paradoxically, according to the wording of the amendment we are still on the same side, but perhaps if he puts it

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to a vote we shall be in opposite Lobbies. We shall see. In the mean time, if he puts it to the vote, I shall support him.

Lord Liddle: My Lords, I had better explain briefly the opposition Front Bench position on this amendment and some of the speeches we have heard. It was a great pity that my noble friend Lord Foulkes could not make Second Reading, because he would have made a strong pro-European speech in that debate. He was right that my noble friend Lord Radice made an excellent speech as well. However, from our perspective I do not think that we can support the thrust of his amendment. I see the logic of his position. In the European Union Act, which we debated over many hours last year, we got ourselves in a situation where, if it was decided to establish a European office of paperclips, we would have to have a referendum on it, because it would involve a transfer of sovereignty to Brussels.

For our part, we believe that referenda should take place only on issues of major constitutional significance, as the Lords Constitution Committee recommended, and that we should be consistent with that principle. As far as the Labour position in the Commons is concerned—and I say this with some trepidation because my dear noble friend Lord McAvoy has a great record as a party loyalist and defender of party discipline in the other place—the shadow Foreign Secretary, Douglas Alexander, in the Commons debate last autumn on the question of a referendum, said:

“I urge opposition to the motion because I do not believe that Britain’s national interest would be served by spending the coming months and years debating the case for Britain leaving the world’s largest single market”.—[Official Report, Commons, 24/10/11; col. 60.]

The leader of the Labour Party made it clear only last week or the week before that Labour’s position had not changed from that view in the mean time.

That is where we stand. The EU Act is a contradictory piece of legislation. The measure is not defined under the terms of that Act as a transfer of powers to Brussels, and we therefore do not have a referendum—but there is no point in reiterating our debates on that Act. Our view is that this is an emergency situation in Europe; the stability mechanism is a necessary part of tackling the problems of the eurozone, which is very much in the British national interest. Therefore, this legislation should go through in the speediest possible time.

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, we all admire the lone role that the noble Lord, Lord Foulkes, has cast for himself in bringing forward these amendments, and his boldness in bringing forward an amendment with which he does not, in fact, agree. This is bravery on a high scale in this debating Chamber.

The amendment, as he pointed out, seeks to insert into the Bill a requirement for a favourable vote in a national referendum before the UK could approve the European Council decision amending Article 136 of the Treaty on the Functioning of the European Union. The European Council decision amends Article 136 of the TFEU. It was adopted in accordance with the simplified revision procedure in Article 48(6) of the

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Treaty on European Union. The decision added a paragraph to Article 136 which confirms that EU members whose currency is the euro may establish a financial stability mechanism. The provisions of Article 136 and the proposed new paragraph apply only—I repeat, only—to member states whose currency is the euro. They do not, therefore, apply to the United Kingdom.

The Bill is required under Section 3 of the 2011 Act, to which the noble Lord, Lord Liddle, referred, to give parliamentary approval to the decision. The other two requirements of that Act were, as noble Lords will recall, a statement by the Minister giving his opinion as to whether a referendum is required—I will come to the remarks of the noble Lord, Lord Foulkes, on that in a moment—and compliance with the so-called referendum condition, exemption condition or significance condition which we debated when we considered that Bill some time ago.

The 2011 Act makes it clear that decisions adopted under Article 48(6) of the TEU are not subject to a referendum under that Act if its provisions do not apply to the United Kingdom. The 2011 Act, to which the noble Lord, Lord Foulkes, rightly drew attention, provides:

“A treaty or Article 48(6) decision does not fall within this section merely”—

I come to that word—

“because it involves ... the making of any provision that applies only to member States other than the United Kingdom”.

The “merely” is intended to indicate that other conditions are also taken into account—for example, the exemption condition or the significance condition. It is not only the fact that it does not apply to the United Kingdom and is outside the application of the United Kingdom; it involves other conditions as well. The decision amending Article 136 therefore clearly falls within the exemption set out in Section 4(4)(b) of the 2011 Act.

The noble Lord, Lord Liddle, raised again the doubts of his own party and colleagues about that Act, which was vigorously debated. I do not think that it would be in order to debate the Act again, although I am always happy to reopen these great issues. I happen to think that it was an immensely important Act which has been a considerable reinforcement to the concerns of the British people that there will be no further transfer of competence to the European Union without a referendum. It is an important safeguard, and my right honourable and noble friends have drawn attention to its importance.

The Government have been clear that a referendum is not required under the 2011 Act right from the very beginning. On 13 October 2011, the Foreign Secretary laid a Statement before Parliament in accordance with Section 5 of the Act, in which he confirmed that in his opinion a referendum was not required under the Act. The Statement was open to judicial review but, as my right honourable friend pointed out, in the intervening eight months, no one has sought to challenge it in the courts. The noble Lord, Lord Stoddart, whose position is consistent and which he has put with admirable consistency over the years, said that in his view there was some practical implication of transfer of competence—

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although he did not put it in quite those words. But no judicial review to make that point has been launched. The noble Lord referred to the aspect, to which I will refer again in a moment, that in exchange for this going forward, the British liability to be exposed under the European financial stability mechanism is released, and the mechanism falls and is no longer in use. The noble Lord, Lord Stoddart, was concerned that that was just a political decision and not enshrined in law. He is perfectly correct, but it is a decision by all 27 members, and it is a firm commitment. To unravel the whole of that would be to throw the entire arrangement of the EFSM into complete chaos. It would be a total reversal of a firm commitment made in good faith by 27 members. We believe that it is a substantial and supported condition.

Lord Stoddart of Swindon: I am most obliged to the Minister. Can he deal with the point that I made concerning the article in the Times? I have given it to Hansard so I cannot quote from it again. The Times queried whether the European Court of Justice could interpret our passing of this Bill as an agreement to future financing within the European stability mechanism. The point being made by the Times was that perhaps the European Court could interpret what we are doing as being consistent with having to make future contributions.

Lord Howell of Guildford: The European Court proceeds in ways which some of us do not always understand, but it is required to interpret the law. There is no issue with the European financial stability mechanism in the way that the noble Lord, Lord Stoddart, said. When this Bill is passed—I can boldly say when—and the amendment of Article 136 is ratified by all 27 member states, that will be the law, and the Court will interpret it. I do not see how the noble Lord could argue that this political decision, which is immensely valuable to the United Kingdom, could be somehow embroiled in the legal interpretations of the Court. I do not see how it comes into the interpretations of the law as embodied in the treaties.

When we debated the provisions of the EU Bill, as it then was, in this House last year, many Members were concerned that we might be bringing referenda into disrepute by requiring them for small changes to EU treaties and by being explicit about when a referendum was and was not required. Indeed, the noble Lord, Lord Liddle, made a proposition that something to do with paper clips, I think it was, could cause a referendum.

I spent a lot of time at this Dispatch Box explaining why we felt the provisions for referenda were not trivial. I explained that one of the reasons the European Union Bill was so long was so that it could be crystal clear about when a referendum was not required, and why issues which appeared small in the schedules to some of your Lordships were in fact the core of red-line considerations involving transfers of competence which we believed were not desirable and would certainly require a referendum.

The way in which the European Union Act 2011 applies to the treaty change we are considering today is clear. The provisions of this decision, amending Article 136 of the TFEU, do not apply to the

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United Kingdom, so the decision simply does not attract a referendum. What is more, there is no transfer of competence or power from the UK to the EU involved. The noble Lord, Lord Stoddart may feel that that is questionable; if that was his determined view and he thought he could mobilise the evidence for it, there would have been an opportunity for a judicial review, but no such review was brought forward.

The amendment to Article 136 simply recognises the ability of eurozone member states to establish a permanent stability mechanism—the European stability mechanism—by means of an intergovernmental agreement. The ESM is established by an agreement. This is not the ESM treaty. This is a treaty merely noting the amendment to the existing treaties, to Article 136.

I have listened very carefully, and I enjoyed the speech of the noble Lord, Lord McAvoy, for which I am grateful. I hear the views of the noble Lord, Lord Liddle—who is a considerable expert on these things—that his party does not stand against this Bill, but believes it will make a contribution. We can have a debate on what sort of contribution it makes to a rapidly changing scene where there are many issues that cannot be resolved at this stage, but holding a referendum on this decision would contradict the clear provisions of the European Union Act 2011. It would introduce confusion about the circumstances in which a referendum would be required in the UK, and that is, to my mind, the reason, above all, why it should be—and, I hope, will be—resisted by your Lordships’ House.

Lord Foulkes of Cumnock: My Lords, while I agree with the Minister that I enjoyed the speech of my noble friend, Lord McAvoy, I can honestly say that it did not contain any words with which I agreed. I was very pleased that my noble friend from the Front Bench gave what might almost be described as a muffled, mild rebuke to my noble friend Lord McAvoy about the importance of loyalty. I think that my noble friend is only too aware of that, because he has managed to follow the party line on many occasions when he did not agree with it, and has been an inspiration to all of us.

I am sorry to disappoint my noble friend—because he is my friend—Lord Stoddart. We are not on the same Benches now, but we were for many years and we agreed on almost everything except Europe. I agreed with everything that my noble friend on the Front Bench said, including his remarks quoting our shadow Foreign Secretary and our party leader on the question of a wider referendum. It would be unnecessary and wasteful. It is not covered in the amendment and not something that I dealt with, but I will say that I agreed with my noble friend completely.

If I had not already intended not to press my amendment, the speeches of the Minister and my noble friend Lord Liddle would have convinced me. Therefore, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Debate on whether Clause 1 should stand part of the Bill.

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Lord Foulkes of Cumnock: My Lords, I will not detain the House on this for more than a couple of minutes. As I found out, trying to devise amendments for the Bill is not easy. It is very tightly drawn and cleverly done by the usual draftspersons. At Second Reading, the noble Lord, Lord Howell of Guildford, said in relation to the ESM:

“The intention is that it will replace both the EFSM and EFSF”.—[Official Report, 23/5/12; col. 802.]

I wanted to devise an amendment that would make that clear. It would have said that by agreeing to the ESM we would have replaced the EFSM and the EFSF. However, I was told that that was not competent within the terms of reference of the Bill. I wonder whether the Minister—this is the only point I shall raise on the clause stand part debate—will give an assurance that it is the understanding of Her Majesty’s Government that those two mechanisms will be replaced. There is a tendency in my beloved European Union to keep things going when they are not necessary—actually, there is such a tendency in successive Governments. I hope that we will have a clear assurance on that.

Lord Howell of Guildford: My Lords, briefly, I will give a clear assurance that it is our intention to replace the EFSM and the European Financial Stability Facility. That has been the aim all along. The Bill does not do either of those things but merely amends Article 136. However, those intentions were stated absolutely clearly and supported by all members of the European Community. That is what is proposed.

Lord Foulkes of Cumnock: My Lords, it was a wise and appropriate suggestion by the Government to group Amendments 2, 3 and 4 together. Amendment 2 would insert,

“Subject to subsection (2A)”.

New subsection (2A) is proposed in Amendment 4. Amendment 3 changes the date to 1 January 2013—again, in order to enable a debate to take place on that.

The amendment is based on the assumption that the Act can come into effect only if the member states of the eurozone are those that existed when the treaty was agreed. Obviously, as we heard at Second Reading, this raises the question of Greece. If Greece was to have withdrawn or in some other way removed itself, or have been removed, from the eurozone, the treaty would not take effect—or, at least, the Bill would not take effect—and our agreement to the treaty would not take effect.

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4.15 pm

I wish to say a few words about the wider issue that was raised at Second Reading. I am glad that the noble Lord, Lord Sassoon, is in his place because I find annoying the constant referrals to the markets and how they must be satisfied. It is as if the markets were inanimate objects or deities that need to be worshipped—and I am pleased that the right reverend Prelate is in his place. It is as if they are superhuman, but they are not; they are controlled by human beings. It is important not to give so much credence to the markets. We keep hearing statements such as fishermen have to understand and accept all the conditions of the sea because we cannot control the sea—even the right reverend Prelate will agree to that—and we cannot control the wind, but there can be some human influence on and control of the markets through government, intergovernmental organisations and intergovernmental agreements.

I have raised previously, and I raise again, the question of credit rating agencies. The noble Lord, Lord Sassoon, is well aware of my concern on this issue. However, I wish first to make a confession. I confessed in a previous debate on Scotland that I had become an accidental Member of the Scottish Parliament because of the strange electoral system. I now confess that I have become an accidental currency speculator. A few years ago I transferred some sterling to a bank account in France at a rate of €1.50 to the pound. The exchange rate is now €1.20 to the pound. Therefore, if I was to transfer the money back to sterling I would make a very substantial profit. I am therefore potentially —not actually—a currency speculator. I could make money by doing nothing. It would take no effort on my part to transfer the money over and, because of the movement in the exchange rate, I would make money.

That would be after a few years and it is a relatively small amount of money, but the real currency speculators could do it in an instant and it could involve millions and sometimes billions—or trillions, as my noble friend Lord Radice, is saying—of pounds. By speculating that the currency rate is going to change, they can make almost overnight thousands or even millions of pounds. Sometimes they can make money without owning or possessing the currency they transfer. They gamble that when the money comes back having increased in value, they will be able to repay the money they speculated with and hang on to the profit. Of course, if they lose, who bails them out? They do not bail themselves out; they come to the Government.

That is one example but there are many others. The whole system is dependent upon these people—they have so much power over it—and I believe that individual Governments and intergovernmental bodies such as the European Union should have much more control over them. I want to mention briefly an example which I gave previously—that of the credit rating agencies. In my view, the credit rating agencies played a central part in the euro crisis. If one thinks about it, the Greek Government—and other Governments such as that of Ireland—have to pay more for the money that they borrow because of the speculation taking place. Who is making money out of it? Someone is making money out of it. The extra money and extra interest that they

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are paying does not go into thin air—it goes to the speculators. I think that it was a Conservative Minister who once described them as spivs and speculators.

Let us take Moody’s as one example, although there are also Standard & Poor’s and Fitch. Moody’s, an American-based private company, recently made a statement about the United Kingdom and it can take it upon itself to rate not just other companies but sovereign countries too. As a result, the sovereign countries have to pay more for their borrowing. Therefore, the credit rating agencies helped to bring on the crisis. Look at who owns Moody’s and at who might benefit as a result of that speculation— it is Berkshire Hathaway, Capital World Investors, ValueAct Capital, Vanguard Group. The companies which own these credit rating agencies benefit by the decisions and the announcements made to downgrade the country concerned. It is, really, outrageous that this should happen.

Lord Wallace of Saltaire: My Lords, I see some puzzled faces around the Chamber and I think that others agree with me that this is rather wide of the amendment under discussion. Perhaps I may remind the noble Lord that we are at the Committee stage when we should address directly the amendments concerned.

Lord Foulkes of Cumnock: I have noticed that the noble Lord, Lord Wallace of Saltaire, has been up on his feet regularly in recent days and weeks keeping colleagues in order, so I know that he is not picking on me in any way. I accept that I had moved just a little wide of the amendment.

I was trying to say that if Greece were no longer a member of the eurozone, having been forced out because of all these speculators, the question would arise whether the treaty should go ahead as originally planned. That is the amendment and that is a valid point. People are concerned that countries such as Greece, Ireland and now Spain, which are in difficulties and suffering, might have to leave the eurozone because of the speculation taking place. If those countries were no longer members of the eurozone, why should a treaty which was drawn up at a time when they were members continue on that basis? I beg to move.

Lord Brabazon of Tara: I wonder whether the noble Lord, Lord Foulkes, would reconsider his suggestion that Greece might be forced to leave the eurozone purely because of the action of the speculators. Is the real reason why Greece is in trouble not because it has been spending money it does not have, it has been borrowing money that it cannot pay back, and it is basically bust?

Lord Howell of Guildford: My Lords, I was interested to hear the noble Lord, Lord Foulkes, recount how he was accidentally drawn into the adventure of currency speculation. I hope that that is all in order, and I am sure that it is. However, having heard my noble friend Lord Sassoon say earlier, rightly and correctly, that he was not prepared to be drawn by the noble Lord into a discussion of Rangers’ tax affairs, I have equally to recognise that I am not prepared to be drawn into a discussion about the noble Lord’s own tax affairs either.

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The purpose of these amendments is, first and obviously, to delay the entry into force of this Act until January of next year. Secondly, they would stop the Act coming into force at all if the membership of the euro area were to change between now and 1 January 2013. This Bill gives parliamentary approval to a European Council decision amending Article 136, as I am afraid I repeated ad nauseam in my earlier comments. This, in Her Majesty’s Government’s view, is firmly in the UK’s best interests. Once the European stability mechanism is established, the UK will not be exposed to any future programmes of financial assistance for the eurozone through the EU budget, specifically through the European financial stability mechanism. The mechanism will contribute to helping our neighbours in the eurozone in the continuing search for financial stability in the currency area. Delaying the coming into force of this Bill until 1 January is therefore not in our interests. It would create uncertainty about the UK’s intentions in relation to ratification of the decision.

In turn, as a knock-on effect, a delay would destabilise the European stability mechanism, which may or may not come into use in the times ahead depending on what occurs. It is not for me to speculate on any of the points that have been raised about whether there will be exits from the eurozone or whether there will be banking unions, insurance unions, fiscal pacts and so on. This move on the part of the House and this Parliament is intended to be a contribution to a very complex jigsaw of requirements. If the Bill were not to come into force at all, that would be even more damaging to what is without doubt a very difficult and challenging situation with many complex and component parts to it, which is what the eurozone states are presently confronting. I am sure that noble Lords will appreciate that it would not be appropriate for me to speculate further on that aspect of what is going to happen. However, what is certain is that, regardless of whether there is a change in member states whose currency is the euro, having a permanent stability mechanism, which is the decision of the eurozone states, is essential for those that remain.

If the Bill were not to be enacted and come into force, the UK would not be able to ratify the treaty change —the Article 136 amendment—and that amendment would not be able to enter into force. This instrument is the change that will provide eurozone members with the legal certainty they want in relation to the ESM, and it is very much in our interests that that at least should be in place.

We want the euro to sort out its problems, of course, as a strong and stable euro area is in the UK’s national interests because of our close economic links. I think that everyone realises that now. Setting up a permanent stability mechanism is part of the solution to the current crisis and this Bill confirms the ability of eurozone members to do that. Failing to approve or delaying the approval of the treaty amendment decision would further contribute to instability across the eurozone, of which there is plenty around already, and have a negative impact on the UK economy. As my right honourable friends the Prime Minister, the Foreign and Commonwealth Secretary and the Chancellor have all repeatedly made clear, a stable eurozone is directly in the UK’s interests. It is a major market for

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our trade, and some would argue that its stability is key to unlocking the prospects for recovery and expansion in all the European and, indeed, global economies, and certainly including this one. Accepting these amendments would risk undermining that prospect of stability and growth further.

4.30 pm

In addition, in exchange for agreeing to the Article 136 treaty change, there is the secured agreement that the EFSF and the EFSM will be replaced, about which I gave assurances to your Lordships’ House only a few minutes ago; and Article 122(2) of the TFEU, the basis for rules establishing the EFSM, will no longer be needed for the purpose of safeguarding the financial stability of the euro area as a whole. Failure to approve the Article 136 treaty change decision would put that agreement at risk straightaway, and the Prime Minister would not fulfil a commitment that he made at the March 2011 European Council—a commitment that was made after both Houses voted in favour of a Motion to approve the draft decision.

I sympathise with the noble Lord’s desire to have greater certainty about the future of the eurozone before supporting the Bill—we would all like to see greater certainty in what is undoubtedly a very chilling situation which is having an impact on nations and economies not merely in the European region but far outside it as well, as world leaders have observed in trenchant terms. It is precisely to try to meet some of that uncertainty, as far as we can from outside the eurozone, that this Bill is necessary.

This treaty change is firmly in the UK’s national interests. These amendments risk undermining them and the steps towards financial stability that the eurozone so very badly needs to take, and that is why they should be resisted.

Lord Foulkes of Cumnock: My Lords, I just want to make two points in reply; first, to the noble Lord, Lord Brabazon, after his interesting—almost astonishing—intervention about Greece. I do not think I said that the increased interest rates were the only reason that Greece is in difficulties. Although one can of course argue that the Greeks have been living beyond their means, for the past few years pressure has been put on them to get their budget into balance and they have been doing that. However, if at the same time the money that they have to borrow costs them more and more because of higher interest rates, it will make it more and more difficult for them to balance the books and meet their obligations. If the noble Lord, Lord Brabazon, had a mortgage on his house and was just managing to survive paying the mortgage at a certain interest rate, he would find it much more difficult if the building society unilaterally doubled or trebled the rate. So I hope that he will accept that, although it is not the only factor, it is an exacerbating factor that makes it more difficult for Greece to balance its books effectively.

I agree very much with what the Minister said about the importance of the stability of the eurozone. That is very, very important, not just from the point of view of the eurozone itself but for us in the United

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Kingdom. People who foolishly wish the break-up or fragmentation of the eurozone, or the falling-out of any one country, are doing this country—and our economy—a disservice. That is very clear in what President Obama and others have said as well. The continuation and the stability of the eurozone are very important indeed, as the Minister said. Because he argued that my amendments might create some problems in relation to that, and because he argued so powerfully in favour of giving as much stability to the eurozone as possible, I am happy to withdraw my amendment.

Amendment 2 withdrawn.

Amendments 3 and 4 not moved.

Clause 2 agreed.

House resumed.

Bill reported without amendment.

Falkland Islands

Statement

4.36 pm

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, with the leave of the House, I will repeat a Statement made in another place today.

“With permission, Mr Speaker, I wish to inform the House that the Government of the Falkland Islands announced yesterday their intention to hold a referendum on the political status of the islands. The decision, which was taken by the Falkland Islanders themselves through their elected representatives, has the full support of the British Government. The referendum will be organised by the Falkland Island Government and will take place in the first half of 2013. Independent, international observers will be invited to observe the process.

In the past, the Falkland Islanders have made it clear that they wish to remain a self-governing British overseas territory and to continue living in the same peaceful and neighbourly manner which has characterised their long history on the islands, which stretches back some nine generations. They have no interest in becoming a province of Argentina. But, regrettably, not everyone is willing to accept this reality. The Argentine Defence Minister recently accused the UK military of holding the islanders as hostages. The Argentine ambassador to the UK has claimed that the islanders would be quite happy living under Argentine rule on the basis that some of them have been on holidays to Argentina. The islanders regularly rebut these baseless allegations and have embarked on an extensive campaign of public diplomacy around Latin America and more widely to make their views known. The Foreign and Commonwealth Office has offered extensive support to them in doing so. Despite this, the Argentine Government continue either to misrepresent their views or to disregard them as irrelevant.

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Elsewhere in the region, the islanders are often surprised by the lack of understanding about their wishes and outlook on life. Because of this, the islanders have decided to hold a referendum to eliminate any possible doubt in the eyes of the world as to what future they want. This will provide a legal, fair and decisive means for the people of the Falkland Islands to express their views. The Minister of State responsible for the Falklands, my honourable friend the Member for Taunton, is on the islands at this time and has discussed the matter in detail with the islanders’ elected representatives. They are excited about the prospect of showing the region, and indeed the whole world, what future they want for the islands.

As the House will be aware, tomorrow marks the 30th anniversary of the liberation of the Falkland Islands by British forces. Events will be held both on the islands themselves and here in the UK to commemorate the extraordinary series of events which unfolded 30 years ago. We will remember all those who paid the ultimate price in defence of basic freedoms. For the Falkland Islanders, tomorrow will bring mixed emotions: thankfulness to those who fought and won, sorrow for those whose lives were lost, and anger that an attempt should ever have been made to invade their home and deny their basic rights. It is fitting that around the anniversary of their freedoms and rights being restored the islanders should announce their intention to give these freedoms further expression through a referendum. In a region that advocates democracy and human rights, it is entirely appropriate that the islanders can express this fundamental right. The principle of self-determination is a key part of the United Nations charter, as we and the islanders have repeatedly made clear and will continue to make clear.

While the current Argentine Government insist that they will seek to recover the islands only via peaceful means, their behaviour towards the islanders remains aggressive in many other ways. They have placed a ban on charter flights through Argentine airspace to the islands. They have banned Falkland Islands-flagged vessels from their ports and prevented cruise ships which have visited the Falklands from docking in Argentina. They have introduced domestic legislation to penalise companies that wish to do business with the Falkland Islands. They have sent threatening letters to those engaged in the wholly legitimate business of hydrocarbons exploration around the islands, and recently they have attempted to politicise the Olympic Games by screening a deeply offensive television advert showing images of an Argentine athlete training on a war memorial on the islands.

These actions, directed by the Argentine Government towards an innocent population of 3,000 people, are not those of a responsible power on the world stage. While the Argentine Government offer threats and misleading rhetoric, the islanders have responded with dignity and determination. For our part, the British Government will continue to offer unequivocal support to the islanders by maintaining a defensive military posture on the islands, by supporting their growing economy and by protecting their rights and wishes today as we did 30 years ago.

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The forthcoming referendum will provide further evidence, were any needed, that the islanders alone will decide their future. It will offer a simple but powerful expression of democracy. I hope that Argentina, and indeed all in the international community, will take note of the islanders’ views. Further details will be announced by the Falkland Islands Government in due course, and I will keep the House informed of developments”.

My Lords, that concludes the Statement.

4.43 pm

Lord Liddle: My Lords, I thank Minister for repeating the Statement made in the other place earlier today. The first duty of the Opposition on the 30th anniversary, tomorrow, of the liberation of the Falklands is to pay tribute to the British forces who served there and particularly to the 255 British service personnel who lost their lives. For our part, we express deep gratitude for their service.

The principle for which they then fought was the right of self-determination, which is enshrined in the United Nations charter. It is why today we back the right of the Falkland islanders to reaffirm that principle, that right of self-determination, and why a proposal for a referendum appears to the Opposition to be a reasonable response on their part to the very regrettable misrepresentations and provocations from the Argentine Government. For our part, we want good relations with Argentina and good relations between Argentina and the Falkland Islands. That is the best basis for a happy, secure and prosperous future all round.

A decade or so ago, it seemed as though much democratic progress was being made in Argentina. In my capacity as chair of the think tank Policy Network, I remember a progressive governance conference where we welcomed the late President Kirchner alongside President Lula and President Lagos. The hope was that Argentina was joining a democratic and progressive family. We are very concerned about the stepping up of Argentina’s rhetoric on the Falklands issue and about whether it is part of a wider campaign by an Administration who are facing very difficult domestic problems. It is a pattern that we have seen before in Argentina, a country that has great resources and fine people but, too often, dysfunctional politics and policies.

The Falkland Islanders are not alone in having difficulties with the Argentine Government. Spain has been incensed by Argentina’s forcible nationalisation of the Spanish stake in its oil company. We welcome the robust response not only from the Spanish Government but by our noble friend Lady Ashton, in her capacity as EU foreign policy representative, against what Argentina has done in this case. This is the kind of international support that we need to mobilise on the question of the Falklands. Can the Minister indicate what discussions have taken place with Spain and our other EU partners as to how we can get a more sensible attitude from the Argentinian authorities? Has the Foreign Office had discussions with my noble friend Lady Ashton, not just about the Spanish episode but also about the current Falklands situation?

More widely, what efforts are the Government making to establish good relations in Latin America? It is now a key British interest, given that this is one of the areas

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of spectacular economic growth in the world and an area where Britain has a lot of historic links. How are we planning to leverage up our relationships with other South American countries in order to isolate Argentina in the stance that it is taking on the Falklands?

The final point is our concern as to whether the Government are sending the wrong signals to the Argentinians. Many of us remember the Franks report and what happened 30-odd years ago, and how the then Prime Minister, the late Lord Callaghan, insisted on keeping a patrol vessel down in the south Atlantic despite the economic difficulties that Britain was suffering. However, the Conservative Government under the noble Baroness, Lady Thatcher, then withdrew that vessel. That was taken as a signal by the Argentinians that we were no longer that bothered. Are we sending a similar signal today, when we have decided that our aircraft carriers should no longer carry aircraft? That seems to me to be a relevant point to ask Her Majesty’s Government.

We want better relations to be established with Argentina, and between Argentina and the Falkland Islands, without conflict. In order to achieve that, the British Government have to have a strategy. I hope that the Minister can give us a glimpse of what it is.

4.48 pm

Lord Howell of Guildford: I am very grateful to the noble Lord for the robust support which he, on behalf of his party, has given to this move, and the way in which he roundly and rightly emphasised the need to speak out against the very regrettable misrepresentations by the Argentinian Government of the situation. As the noble Lord said, his party wants good relations with Argentina. Of course, so do we all. It is a country of great potential with which, were it not for this situation, we would be able to work effectively to great benefit of the people of Argentina. That is apparently not the wish of the Argentinian Government, who have persisted with the aggressive attitude that was mentioned by my right honourable friend in his Statement.

As to the international scene, we of course work with all our EU partners, but there is no wish in Her Majesty’s Government to involve other countries in a bilateral relationship on a bilateral issue, which is fully confirmed under international law in accordance with the rights of self-determination which nations across the globe fully recognise. We have made major strides in the past year or so in developing excellent relations with Latin American countries. Latin America is emerging, as are all the great developing nations of this earth, as a major and significant player in world affairs, as a vital new market for our goods and as a source of the generation of wealth and political influence. Both my right honourable friend the Foreign and Commonwealth Secretary, and my honourable friend the Minister of State, Jeremy Browne, have been tireless in their work in that region in establishing—or re-establishing, because this is part of history—very good links with these great and important nations. Work is going on at various international conferences. Some very firm lines have been taken about the need for self-determination. This has been a very robust response, even when

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Argentinian diplomats have tried to involve other countries in their cause in various ways. That is the situation at present.

The noble Lord talks about a strategy for the future. The strategy rests on the rock of our commitment to the islanders’ wishes and their determination to be a self-governing territory of the United Kingdom. That is what they wish to remain to be, and the referendum will no doubt establish beyond doubt that there is no change in these wishes, and that they are determined to assert their preferences. That is all I have to say on the matter, beyond, again, to thank the noble Lord for his robust support.

4.51 pm

Baroness Hooper: My Lords, would the Minister agree that one of the more disturbing developments has been the way in which the Argentine Government have persuaded many other countries in the region, even great friends of ours such as Uruguay and Chile, to deny entry to British naval vessels? Can he reassure us that our embassies in those countries are working hard to refute the unsubstantiated messages put forward by the present government in Argentina? Also, can he agree that as in the case of the Gibraltar referendum a few years ago, a clear message from the people of the Falkland Islands would be most helpful? Will he also be kind enough to convey to the people of the Falkland Islands the fact that we are all fully behind them, especially at this time?

Lord Howell of Guildford: Yes, I will certainly do that, and convey that in clear and simple terms. As to the efforts of Argentine diplomacy to persuade others to support their posture and their claims, I can assure my noble friend that our embassies, our diplomatic machinery and my ministerial colleagues are fully engaged in countering some of the misrepresentations that are being aired around the place. We have had a good response from responsible friends that they are not going to be automatically pushed by Argentina or by claims that go flatly against the basic principle of self-determination for the peoples of the Falkland Islands. This is the 21st century, in which overriding the self-determination of peoples is not the custom or the desirable pattern, or indeed in accordance with full international responsibility. We have made that very clear and will continue to do so.

Lord West of Spithead: My Lords, 30 years ago—almost to the day—I sat in some sorrow writing letters to the mothers, wives, siblings and children, of the 22 boys who were killed when my ship was sunk. This task was made a little easier, first because I was very proud of them, and secondly because I felt we had been involved in a just war. I am appalled by the behaviour of the President of Argentina in making outrageous statements about the Falkland islanders purely to distract attention from what is going on in her own country. She seems to forget that the only reason she is there democratically is because we won that war. However, the Minister will be glad to hear that my question does not relate precisely to aircraft carriers and warships but rather as to whether he

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would join me in agreeing that we owe a huge amount to our merchant marine, 73 of whose vessels were involved in the Falklands War? Does he believe that we have sufficient British merchant mariners today to ensure that if there is trouble globally, we are able to provide the merchant ships, which are so crucial for global operations? They are after all the “fourth service”, as they were referred to by Winston Churchill.

Lord Howell of Guildford: The House will be very grateful to the noble Lord, who speaks to us from the heart of history. He was there and experienced the agonies and challenges of that time, 30 years ago. The country is grateful to him for that as well. As to his question about whether we have the resources to meet global problems, one has to be realistic. If all sorts of crises were to develop on all sorts of fronts—for instance, all the pinch points in the world traffic of oil, gas and energy—no one country could deliver a full Merchant Marine to cover that. Do we have the resources to defend the Falkland Islands against the dreadful, absurd and almost ridiculous prospect of a threat from Argentina again? Yes, we do, but I hope that Argentina will not be stupid enough to do that. We certainly intend to maintain those resources; there can be no doubt at all about that.

However, who knows what great world threats may develop in these troubled times? If they do, we obviously have to act closely with our allies. One could not expect one country alone—perhaps not even the mighty United States—to be able to mobilise adequate resources for all the troubles in the world. There are plenty, not least the piracy on the eastern side of Africa—and, increasingly, on the western side—which now take some of our resources. There are many other problems as well.

Lord Davies of Stamford: The noble Lord has already received what he rightly described as robust support from my noble friend on behalf of the Opposition for the Government’s support for this referendum, and for his justified words in describing the recent behaviour of the Argentinian Government. I think he will get equally robust support universally, throughout the House this afternoon. I hope that he is able to tell the Argentinian ambassador about that personally.

However, I am afraid that the Government cannot escape a wide measure of responsibility for the very bad change in the situation over the past year, particularly in the behaviour of the Argentinians. It was the worst possible signal to send to Argentina when we got rid of our carrier strike capability. We sent a signal that if the Falkland Islands were ever invaded again in the future, next time we would not be able to retake them. That was thoroughly deplorable. In this very unfortunate situation, will the Government consider the possibility of regularly deploying a “Trafalgar”-class or, prospectively, an “Astute”-class submarine in the south Atlantic? It should surface from time to time to leave no doubt in anybody’s mind that it is there.

Lord Howell of Guildford: I cannot comment on the movements of our submarines or on related intelligence matters. I applaud what the noble Lord said at the beginning but completely refute his later sentences.

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There are forces in the Falklands. We are perfectly well placed to rebut and repel any renewed invasion. Decisions about the strategic defence review, the future of our carriers and so on have no effect whatever on that sustained ability to defend the islanders against another invasion.

Baroness Falkner of Margravine: My Lords, I express our gratitude to the families of the service personnel who made the ultimate sacrifice. On behalf of others in the House, I say how grateful we are to hear from the noble Lord, Lord West, when he speaks with such passion about the events of 30 years ago.

My question is about the conduct of the referendum. The Falkland Islands Government have obviously been very bold in making this move to demonstrate their confidence in their ability to determine their own future. I note that the Statement says that international observers will be invited to observe the process. I wonder whether my noble friend might suggest to the Falkland Islands Government that it is important to have observers from Latin American countries to demonstrate the rigour of the process. That would be most helpful in countering Argentina’s public relations, which are of course inaccurate.

Lord Howell of Guildford: If I may say so to my noble friend, that is a very interesting thought, which I will certainly pass on to my colleagues. It will be important to establish beyond doubt that whatever emerges from the referendum is absolutely and properly established, and that the whole process is properly conducted. Of course it is undeniably on a very small scale, and therefore the monitoring and checking should be absolutely 100% proof that this is a sensible and precise expression of the wishes of the islanders.

Lord O'Neill of Clackmannan: I welcome the Statement by the Minister, and declare an interest in so far as I am the chairman of the South Atlantic Council, a body established after the war to try to improve the triangular relations between the islanders, Argentina and the United Kingdom. The degree of success that we have enjoyed has been variable, but it must be made clear that sabre-rattling by the United Kingdom at this time is irrelevant, because democracy followed the war in Argentina and that, in turn, resulted in the demilitarisation of its economy and the country. The defence cuts of which we are talking this afternoon in the United Kingdom are as nothing compared to what has taken place in Argentina. It is therefore totally unrealistic to talk in terms of a military threat from Argentina. The Malvinas mania going on in Buenos Aires and across the country is concerned primarily with disguising the economic chaos engulfing that country.

We should take Gibraltar as a pointer. When a clear expression of democratic opinion was made, Spain began to think again about how it dealt with the problem of Gibraltar. In the kind of triumphalist rhetoric in which we sometimes indulge regarding the Falklands, it would be unfortunate if we failed to think about what should happen after the referendum. Now, for the first time in several years, there is an ambassador to the Court of St James’s from Argentina. Let us take advantage of that, and start a dialogue

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rather than just the haranguing which has been carrying on for the last few years. Let us use the opportunity of what I am fairly confident will be a clear expression of the opinion of the people of the islands that they wish to retain the status quo. There are many things—fishing, hydrocarbons, tourism, shipping, flights to the islands—which should be the subject of clear and straightforward negotiation. This could provide us with an opportunity to start afresh after many lost years—largely lost, I have to say, due to Argentine intransigence.

Lord Howell of Guildford: The noble Lord is extremely well informed on this and has followed it very closely. Of course, leaving aside sovereignty and the wishes of the islanders to remain a self-governing territory of the United Kingdom—very clearly expressed, and I am sure they will be again—a whole range of things have been offered to Argentina. There is much talk, of course, about the hydrocarbons explorations around the island. Thirty years ago, when I was involved in some administration of this country on energy matters, one of the files on my desk was concerned with exploration of the hydrocarbons around the Falklands—and that was right at the start of this, in 1980. All along, and increasingly and very specifically in the 1990s, offers were made to the Argentinean people to co-operate very closely and to share the benefits of anything that emerged. That was just one example; the noble Lord gave many others. There is a whole range of areas where there could be extreme benefit to the people of Argentina, but they must not include—and in fact must exclude—the consideration of the sovereignty and the self-determination of the people of the Falkland Islands.

Lord Deben: Is my noble friend aware that the Argentine Government have been arguing against the referendum on the basis that those taking part will be settlers, or the children of settlers, on the Falkland Islands? Will it be possible for him to bring to the attention of the Argentine ambassador the fact that she is a settler and the child of settlers, that there is no voter for the President of the Argentine who is not himself or herself a settler, and that if we are talking about settlers we are all in it together?

Lord Howell of Guildford: My noble friend makes a very acute historical point that many of the inhabitants of almost every country on earth are settlers; one thinks, not least, of the United States. I believe that the ancestors of many here were also settlers. Indeed, I often hear divisions between the arriviste Norman settlers who came in in 1066 and those who were here already, so my noble friend makes a very good point. However, I do not intend to pursue it with the Argentine ambassador. I have had the opportunity to meet her and I believe that the view that we should express in this country is not one of tit for tat but a dignified intention that the sovereignty of the Falkland Islands people must be preserved, that we wish Argentina well, and that we would like an end to this distracting quarrel and the restoration of the co-operation and links which we once had with the Argentine.

Lord Gilbert: My Lords, it will be within your Lordships’ knowledge that unfortunately down the years we have not always enjoyed the full support of

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our American friends with respect to matters relating to the Falklands. The situation is slightly different now. If the reports are accurate, the present American Secretary of State is so disturbed at the irrationality of some of the decisions being made by the Argentine President on a whole range of subjects, a lot of which have nothing whatever to do with the Falkland Islands, that there may well be a change in American attitudes to the situation down there. Therefore, I press on the Minister the desirability of inviting our American friends to give their full support to this referendum and say that it demonstrates that democracy works.

Lord Howell of Guildford: We shall certainly seek to follow that advice. The noble Lord is absolutely right: there are big changes in the region. Not least is that, with the revolution in world gas discoveries and developments, Argentina in due course could be a major beneficiary and have huge reserves of shale gas. This ought to be of benefit to the Argentinian people. That is the path they should follow rather than distracting themselves with complaints and aggression against the Falkland Islands.

Lord Williams of Elvel: My Lords, the Minister said that the Government were not anxious to involve other Governments in the Falklands problem, which I quite understand, but is that altogether wise? The European Union has a treaty obligation to defend trade from EU countries, wherever it occurs. As I understand it, it has taken a very dim view of the Argentine nationalisation of Repsol. I believe that the Foreign Affairs Council met about two weeks ago to decide what the European Union was going to do about it. This is relevant for us because, as the noble Lord quite rightly points out, the Falklands may prove to be a very substantial offshore oil province and if there is any intervention the EU as well as ourselves should be there to defend it. Can he tell the House what the Foreign Affairs Council of the European Union decided with regard to Repsol at its meeting about two weeks ago and whether we are going to involve the European Union in defence of the Falklands offshore hydrocarbon exploration?

Lord Howell of Guildford: I think, from memory, that the Foreign Affairs Council deplored the nationalisation of the Repsol-connected subsidiary in the Argentine. I will check on that to be 100% sure and if I am wrong I will contact the noble Lord. However, he is really making a broader, very profound point that there are all sorts of reasons, as have already been raised this afternoon, why responsible democracies, whether in the EU or elsewhere, should be concerned about the actions of various kinds being taken by the Argentine Government. The nationalisation of the Repsol subsidiary obviously greatly affects Spain. Any other measures interfering with free trade and trade with European Union powers affect them very greatly.

As far as the specific matter of the Falkland Islands’ wish to remain a self-governing territory under the United Kingdom is concerned, that is a bilateral issue. However, it is perfectly sensible that we should work with other EU countries on policy and general matters towards Argentina and towards hydrocarbon development

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off the coast of Latin America or anywhere else. It is certainly something that would become involved in our discussions. On the specific point of the last FAC meeting, I will check and confirm what I have said.

Lord Tordoff: My Lords, some years ago I had the pleasure of visiting the islands with the South Atlantic Council, under the aegis of the noble Viscount, Lord Montgomery. On that visit, there were a number of people from industry and the arts with various connections here. In particular, there were two colleagues of mine from the oil side of the Anglo-Dutch company which I served for many years. They made it very clear that political instability in that area was a real disincentive to exploration. Perhaps the Argentines can be reminded of this, with the things they have been doing recently. There is no great incentive for oil companies to go into areas like this which are difficult enough geologically, but are made worse by political instability. They are probably doing themselves a lot of damage.

Lord Howell of Guildford: My noble friend is entirely correct. This applies not merely to drilling for exploration. As those—including my noble friend—who are familiar with it know, then comes development, which is expensive, and after that production, which is also extremely expensive. Vast sums of money have to be invested and big investors will not move if there is a severe threat of political instability. He is quite right that it therefore affects the prosperity not just of the Falkland Islanders but of the whole area. In various ways it damages the interests of the people of Argentina and we should point that out.

Civil Aviation Bill

Second Reading

5.13 pm

Moved by Earl Attlee

That the Bill be read a second time.

Earl Attlee: My Lords, we are an island nation and our access to the rest of the world—and the rest of the world’s access to us—is primarily through air travel. That is why the aviation sector is so important to our economy. In 2010, goods worth £113 billion were moved by air between the UK and non-EU countries. In the same year, UK airports served nearly 400 international destinations. That level of activity is possible because over the past 30 years the aviation industry has changed to meet the needs of the customer. The emergence of low-cost carriers is one example of how the industry has innovated and diversified. There has also been an increase in the number of people travelling by air in this country, from 59 million passengers in 1982 to 211 million in 2010.

While the sector has changed dramatically, the regulatory framework which governs it has not. Much of our aviation regulation originated in the 1980s, and needs to be brought into the 21st century. The Government are committed to bringing vital reform to our aviation regulation. In a moment I will set out this reform in more detail, but let me first make clear the important theme that runs through the Bill: putting the interests

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of the passenger at the heart of airport regulation. For the first time, the CAA’s primary economic regulation duty will be to users of air transport services—that is, the passengers and owners of cargo.

The Bill introduces reform in four areas: the economic regulation of airports, the legislative framework of the CAA, the Air Travel Organisers’ Licensing scheme, and aviation security. I would like to explain each of these in turn, beginning with the reform to the economic regulation of airports. In the UK, the gas, electricity, water, telecoms and post sectors all have some level of economic regulation. Economic regulation typically operates through an independent regulator capping the prices that companies with substantial market power are able to charge and specifying levels of service quality. Much of the aviation industry in this country is competitive. That is how the Government prefer it to be. Effective competition gives firms the incentives to invest and improve efficiency, choice, and service quality.

However, a small number of airports—currently Heathrow, Gatwick and Stansted—have substantial market power and are not subject to sufficient levels of competition. In order to replicate the effects of a competitive market on these airports, the CAA exercises its powers of economic regulation in the form of price caps and service quality requirements. However, there is compelling evidence that the framework for the economic regulation of airports needs updating. The Competition Commission has concluded that the regime distorts competition between airlines and should be reformed. Advice from an independent panel of experts and responses from three evidence-gathering exercises has further indicated that the current regime is not fit for purpose. I should also add that the previous Government agreed that reform is necessary—a fact that helps explain the considerable degree of cross-party support the Bill has attracted so far.

The most common criticisms of the current regime are that the regulation is disproportionate and difficult to adapt to individual airports, that the CAA is unable to respond effectively to extraordinary events such as volcanic ash or extreme weather, that the regulator is insufficiently accountable for its decisions and its priorities are unclear, and that the regulatory process is burdensome and inefficient. The Bill would remedy these problems.

Where the current legislation gives the CAA four separate and sometimes competing duties, the Bill replaces them with a primary duty to passengers and owners of cargo. Where the CAA is presently constrained by rigid rules that require it to set five-year price caps when regulating dominant airports, the Bill would give the CAA a modern licensing system. Under this new system, licence conditions could be tailored to individual airports to tackle specific challenges at particular times. This licensing system would also enable the CAA to reduce the degree of economic regulation imposed on individual airports if it believed that this would benefit passengers. For example, instead of controlling prices, it could monitor prices while regulating certain aspects of service quality. The new system would also enable the CAA to impose different regulatory time periods. For example, setting longer periods for price controls would provide greater certainty and could stimulate investment.

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Currently, it is the responsibility of the Secretary of State to decide which airports should be subject to economic regulation. The Bill proposes that the CAA, as an independent and expert body, should make that decision against clearly defined criteria set out in the legislation. Another criticism of the current regime is the lack of accountability it provides for key regulatory decisions. At present, judicial review is the only way to challenge the CAA’s decisions on the price cap and service quality standards that airports must meet. Under the Bill, the licence conditions imposed will be appealable by the licence holders and materially affected airlines. These appeals will be made to the Competition Commission, thereby removing the need to go straight to judicial review. The decision on whether an airport is dominant will be also be appealable to the Competition Appeal Tribunal. To summarise, the reforms will deliver a new system of regulation that is fairer, more flexible, and more focused than the current regime.

I turn to reforming the legislative framework of the CAA itself. Measures in Part 2 of the Bill will change the way in which the CAA operates, improving transparency and accountability; removing unnecessary government involvement and funding; and cutting red tape. The Government believe that a more transparent system of providing information would be of benefit to the public. At the moment it is very difficult for passengers to compare air services—for example, to establish which airline is most likely to lose luggage, or which airport garners the most complaints from passengers. It is also difficult for consumers to find out environmental information about aviation.

In 2011, PricewaterhouseCoopers looked at the reports of 46 world airlines and found, for example, that only one-third reported on their noise levels. The Bill will create a new duty for the CAA to publish, or arrange for the aviation sector to publish, information to help users compare services. The CAA will also be given a duty to inform the public about the environmental effects of civil aviation in the UK. It is important that these duties are performed proportionately, so the CAA will have to consult on its approach and have regard to the principle that the benefits of taking action should outweigh any adverse effects.

Other measures to modernise the legislative framework of the CAA include giving the CAA new freedoms to appoint its own executive directors. Where at the moment the CAA has recourse only to slow, costly, and often disproportionate criminal sanctions in enforcing regulations, the Bill will enable the Secretary of State to give the CAA powers to enforce offences through civil sanctions. I am pleased to say that Part 2 of the Bill also brings forward a recommendation that was made by this House.

In the course of its licensing duties, the CAA collects medical data on individuals in the air transport industry. In 2007, your Lordships’ Committee on Science and Technology, as part of its inquiry into air travel and health, recommended that anonymised medical data held by the CAA should be made available for ethically approved medical research. Clause 104 meets this recommendation. Of course, we have built in safeguards

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to help to ensure these data are used appropriately. I urge your Lordships to read the appropriate section carefully.

I will now move on to our proposals to improve the regulation of aviation security. Keeping people safe and secure when they travel is of prime importance. At present, aviation safety is regulated by the CAA, while security regulation is carried out by the DfT. The Bill would move security regulation from the DfT to the expert regulator, the CAA. On both safety and security, the aviation industry would have to deal with only one regulator, not two. The move would have the further advantage of bringing the “user pays” principle to aviation security. The costs of the aviation industry should, as far as possible, be paid for by the people who use it. At the moment, the aviation industry pays for safety regulation, but the public purse pays for security regulation. The position under the Bill would be fairer.

The final measure in the Bill that I will mention, which accounts for just one clause, Clause 94, is the reform to the Air Travel Organisers’ Licensing scheme—ATOL for short. Over the years the ATOL scheme has given peace of mind to millions of holidaymakers who have known that because their holiday is covered by the scheme they will not be left stranded or out of pocket if their travel company becomes insolvent. However, diversification in the holiday market since the scheme was set up—in particular, the changes associated with internet booking—mean that it is no longer clear to some consumers whether their holiday is ATOL-protected or not.

Certain sorts of holiday—for example, those sold by airlines and on an agent for the consumer basis—cannot currently be required to be included in the ATOL scheme because they fall outside the relevant powers in Section 71 of the Civil Aviation Act 1982. So Clause 94 of this Bill would allow us to improve clarity for the consumer, by giving the Secretary of State powers to add more holidays to the ATOL scheme, including holidays sold by airlines and agents for the consumer. This should also mean that businesses selling holidays that include a flight will have a more coherent and consistent regulatory framework in which to operate.

The Civil Aviation Bill has undergone thorough scrutiny—

Lord Clinton-Davis: The Minister is right to stress the importance of aviation to this country. Does it not follow that the pilots are an extremely important part of that? Why did 91% of the members of the BALPA union consider the Government to be not supporting the industry sufficiently? Is that not a serious point that ought to be taken into account?

Earl Attlee: My Lords, I am sure it is a very serious point. I will be meeting representatives of BALPA shortly, certainly before the Committee stage starts.

The Transport Committee found the Bill to be clearly welcomed by the aviation industry, including airlines, airports and the CAA. It also found that the draft Bill has been,

“subject to detailed review and consultation over a lengthy period”—

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and, although it raised some points which have since been picked up in the Commons, it found that the Bill—

“appears to offer a better way to regulate UK airports in the future”.

I look forward to debating the merits of the Bill with your Lordships in this Chamber. I am confident that we will maintain the high level of scrutiny that the Bill deserves and has attracted so far.

I beg to move.

5.30 pm

Lord Davies of Oldham: My Lords, I thank the Minister for his clear exposition of the contents of this important Bill. He will know that we, on this side of the House, are familiar and indeed, supportive, of its broad structure. That is not surprising since, as the Minister indicated, the Bill was under preparation by Labour Ministers not so very long ago.

That does not mean that, while accepting the broad principles underpinning the Bill, we do not find much of the detail disappointing. Of course, we will seek to reflect that disappointment in a constructive way in Committee, in our amendments. The Bill, after all, was driven through the Commons with almost no concessions to our Front Bench team’s well argued criticisms and constructive amendments, and not all the Government’s arguments against those amendments were wholly convincing.

My noble friend Lord Clinton-Davis reminds us that the Bill also needs to be put in some context. Of course, I welcome it, as one of the first positive signs from the department of constructive work on the aviation industry, after we have, for two years, seen the Government tread water in circumstances where the industry has been making its demands very clear.

Those demands, as the Minister indicated, are impressive and insistent, because this is an industry that expands and grows, of which we should be proud and solicitous to its needs. Yet, we still await the broader context in which to view this Bill in terms of the Government’s future aviation policy.

Usually when I make these points, the Minister treats me to a “not just yet” response that suggests I should bide my time. Today he did not even do that; I got nothing from him on when aviation policy will be made manifest. Perhaps when he winds up the debate he will have some words of solace for those of us who are still extremely anxious about what the Government may propose.

As the Minister said, the Bill sets out to modernise the regulatory framework for civil aviation. We endorse the broad thrust of the reforms to the economic regulation of airports and to the legislative framework of the Civil Aviation Authority. We support many of these changes, improvements and reforms. The Bill seeks to make the Civil Aviation Authority more effective and, as the Minister emphasised, more accountable. That is to be commended. We also support in broad terms the transfer to the CAA of certain aviation security functions from the Department for Transport. However, we have anxieties in this area. I am sure that they will be shared by noble Lords when we discuss them in detail, and may even be voiced today at Second Reading.

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We also approve of the strengthening of the Secretary of State’s powers so that holidays sold by airlines—an increasing feature of the holiday trade—can be included in the ATOL scheme, with its greater consumer protection. Again, we have one or two questions that we will address in detail, but it is a most welcome development. We will seek to ensure that the Minister fulfils his claim that the Bill will put the consumer, the passenger and the user at the centre of arrangements for governing the industry.

However, the problem is that the Bill seeks to implement these changes in ways of which we are strongly critical. In particular, the Government’s backsliding on the policies necessary to moderate climate change is already evident in key areas of the economy, and aviation is no exception. The Bill gave an opportunity to the Government at least to show an earnest intention on these issues, but it is inadequate. We look forward to lively debates in Committee. The Bill weakens the terms of proposed environmental obligations and sends the wrong signals to the industry. There is no longer a clear duty on the Civil Aviation Authority in its crucial role of economic regulation to have regard to compliance in airports’ operations with environmental and planning law.

Airports are major economic activities. We address a lot of our attention to one of the world’s great airports that is by far the most significant one in the UK: London Heathrow. However, other airports are very significant economic enterprises in their areas, and there are consequences from their considerable economic activity. That is why environmental concerns about their operations have been well articulated by the public for many years, particularly in the case of Heathrow, which has the disadvantage of being our largest airport and yet located within the confines of the M25 in an area of very considerable population density. Yet the Bill limits the legislative pressure on the Civil Aviation Authority, and thus the airports, so that investment in improving environmental performance may be reduced. Our amendments in the Commons were rejected by the Government in Committee and on Report. When I say “the Government”, I mean the full coalition Government—the Liberal Democrats participated as fully in this rejection as the Conservatives —and the Minister, therefore, is bound to expect that he will be strongly challenged by us in Committee. We shall table amendments to impose a duty on the CAA to ensure that aviation plays its part in meeting the UK’s carbon reduction targets.

The Minister emphasised that improved passenger welfare is a very important objective in the Bill. We have only to cast our minds back to the suffering of stranded passengers in the winter of 2010-11 to recognise how little consideration was given to passengers at that time. We do not consider that the provisions in the Bill meet the necessary requirements and we shall seek to strengthen the obligations of the airports and the CAA. The House of Commons Select Committee on Transport expressed strong concerns about passenger welfare and we agree that the Bill should guarantee that airport licences will be so structured as to address fully key areas of passenger satisfaction, including baggage handling, which is problematic enough, and the even thornier issue of immigration. Recent Government

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proposals on strengthening immigration controls have significant implications for busy airports, as we have all found out in the past 12 months. We shall explore the transfer of responsibility for security from the department to the CAA. We are concerned that the proposals are motivated more by reducing departmental expenditure than efficiency in action. The House will be concerned about how effective are those proposals. The airlines, of course, are concerned about the likely costs of this transfer, and we are worried about reduced efficiency when highly qualified and experienced staff are subjected to major change in their employment conditions and the organisation for which they work. The morale of staff is an important issue so far as security is concerned and the Government must recognise that they cannot just flick a switch in this area and expect this particular light to come on readily. They must reassure us that they are approaching this issue with the greatest amount of care and consultation.

The House of Commons Select Committee on Transport also recommended that the CAA should be brought within the remit of the National Audit Office—after all, the Minister has expressed that the objective of the Bill is to make the CAA more accountable—but the Government in Committee and on Report in the Commons were singularly unconvincing in their arguments on the issue of this important financial control over an expanding CAA. We remain utterly unconvinced by their arguments. Of course, we shall have the opportunity of examining this important case in Committee.

The Bill affords us a significant opportunity to cause the Government to think again about the important changes to the role of the Civil Aviation Authority. Of course, we agree entirely that the Civil Aviation Authority was overdue for reform in a rapidly changing industry and that, in this changing environment, it is essential that it is fit for purpose. That is why so much preparatory work was done under the previous Administration. However, the Bill introduced by the Government—the Bill before the House today—has obvious departures from the thinking that was present in its early stages. We shall seek to harness the informed opinion available on all sides of this House to effect necessary changes.

5.40 pm

Lord Bradshaw: My Lords, this is not a debate about determining new runway capacity. I believe that we can make much better use of the capacity we already have. In preparation for this Bill, I have been to Luton, Gatwick, Stansted, and Birmingham airports. It is obvious that there is plenty of spare capacity which can be bought online. Releasing capacity is very much tied in with having good quality public transport access. This area needs attention and probably ought to be addressed when the Government consider the HLOS target for the railway. However, the improvements to surface capacity—for example, between Stansted and London—would benefit a huge number of people who live in the Lea Valley and at the moment enjoy what I would call a less-than-good train service.

I wish that people would stop talking down—I am talking about what is going in the press, not in this debate—the ability of airports within easy reach of London to maintain good air services throughout the

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world. If we take Germany as an example, it is not necessary to have one hub airport which offers everything. Members will know that, for example, Gatwick now has two services to China, one to Hong Kong and one to South Korea, and one other which has been started recently. It shows that when there is competition between the airports, they seek out the markets to which Heathrow draws a lot of attention but which can, in fact, be served quite effectively by other places. Gatwick and Birmingham are not far from London, and Luton would be very much more convenient if the arrangements for getting people from the train to the plane were anything other than third world.

We support the general thrust of the Bill and, particularly, devolved power to the CAA and the extension of the ATOL licence to enhance the protection of passengers and holidaymakers. Does the Minister consider that the proposed charges are sufficient to eliminate the insolvency of the Air Travel Trust Fund? That is, the fund out of which people are compensated, which I believe has an accumulated deficit of £40 million. However, we are more concerned that the CAA should have environmental objectives and duties relating to pollution and noise. These objectives should, of course, be funded by airport charges levied on airlines. Again, is the noble Earl minded to engage seriously with the environmental issues of pollution and noise?

I am a little concerned about the words in the Bill concerning a market power test. When Stansted, Gatwick and Heathrow were all part of the British Airways Authority there was not much competition between them, but Gatwick has shown that there can be competition. It has 25% spare capacity and could be an effective competitor for a number of services from Heathrow. Unless there is market power, there is no need for regulation. Regulation is necessary in the absence of fair competition.

I want to draw the Minister’s attention to the scope of rights of appeal, which he touched on in his opening remarks. To protect airport investment in environmental improvements, many airlines will attempt to use the proposed appeal mechanism as a delaying tactic. I leave it to noble Lords to imagine which airlines might wish to avoid any charges at all, but they will have to be made if we are to meet the objectives. Of course, the environmental duty should apply not only to the three designated airports, but to those which handle more than 5 million passengers a year. That would include Manchester, Luton, Birmingham, Edinburgh, Glasgow, Bristol and Liverpool airports.

There is also concern that in proposing to control the environmental problems, the CAA will invent, as it were, a new bureaucracy. Almost all of the airports’ annual reports include reports about pollution and noise, as well as on things like the use of water and salvage. We should not seek to duplicate work, but simply to harmonise best practice between the various airports.

Lord Clinton-Davis: Will the noble Lord say something about the new generation of aircraft? Are they not bound to be able to limit noise more effectively?

Lord Bradshaw: Of course they will because every aircraft manufacturer is striving to produce quieter aircraft, and that we would like to see. It is not just a

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question of noise from the aircraft, it also concerns maintaining the right take-off trajectory and angle of climb, which can significantly reduce noise. However, I would draw the noble Lord’s attention to the fact that more than 50% of the pollution relates to ground access. It is not the aircraft, but what happens on the ground, and it is that area which I would ask the CAA particularly to review.

Lastly, I refer to the practice of stacking. What progress is being made on the elimination of stacking through better control of the airspace? It is not reasonable for an aircraft flying from Hong Kong to arrive an hour early and then circle around London. If there is a tail wind, the whole flight can be regulated so that the aircraft travels less quickly, which would save fuel and ensure that it arrives at London airport when it is ready to accept it. We should try to use technology and the single-sky policy to control airspace generally and thus ensure that aeroplanes reach their destinations on time. You cannot have trains stacked outside stations; you have timetables to regulate them. I believe that the same is true of aircraft.

5.50 pm

The Countess of Mar: My Lords, I feel I have been here before. During the passage of the previous Civil Aviation Bill in 2006, I recall long discussions on Clause 8, relating to health—the noble Lord, Lord Davies of Oldham, may recall our exchanges then. These included my concerns, and those of injured pilots, over the effects of breathing what is known as “bleed air”, which could contain organophosphates, on the health of both airline crew and passengers.

The Civil Aviation Bill before us today includes the requirement under Clause 84, “Environmental information”, that:

“The CAA must publish, or arrange for the publication of, such information and advice as it considers appropriate relating to—

(a) the environmental effects of civil aviation in the United Kingdom,(b) how human health and safety is, or may be, affected by such effects, and(c) measures taken, or proposed to be taken, with a view to reducing, controlling or mitigating the adverse environmental effects of civil aviation in the United Kingdom”.

This is to be welcomed, but I would suggest that there is one environment in particular where this duty is avoided: the cabin environment. Despite growing evidence, contaminated cabin air continues to be a very serious threat to the safety and health of air crew and passengers of all ages. This has been known since 1954. Indeed, a year later, an engineer from the company that is now part of Boeing recommended that,

“in light of the risk of exposure to oil fumes in flight, airlines should either operate non-bleed ventilation systems or filter the engine bleed air before supplying it to passengers”.

The Civil Aviation Act 2006 clearly sets out the responsibility of the Secretary of State and the Civil Aviation Authority for,

“organising, carrying out and encouraging measures for safeguarding the health of persons on board aircraft”.

Five years ago, the noble Lord, Lord Tyler, welcomed the House of Lords Science and Technology Committee’s 2007 report on air travel and its call for urgent action on contaminated air, saying that this was a,

“very serious matter of public safety”.

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Since that time, some research has been undertaken by the Department for Transport-sponsored Institute of Environment and Health at Cranfield University—more of which later.

I believe that more rigorous action is required and this duty cannot be abdicated in favour of the European Aviation Safety Agency—EASA. In 2007, the House of Commons Transport Committee’s report on the work on the Civil Aviation Authority stated that EASA was,

“not yet ready to do its job and it is vital that the UK transfers no further responsibilities to it. I see no evidence that the position has changed”.

Apart from the new Boeing 787, passenger aircraft use unfiltered, heated air drawn directly from aircraft engines and auxiliary power units for cabin air conditioning. This is termed bleed air, because it is bled from the compressor section of the engine. This system has been used since just after World War II, when engine temperatures and pressures were considerably lower than today. The use of compressed air for ventilation was described in 1946 as “fortuitous”. With rising oil prices, the aviation industry was faced with huge commercial challenges; since the initial introduction of bleed air, both performance and efficiency have become critical. As a result, it is normal for the temperatures to which oils are now exposed within the engine to be far higher. This is a serious toxicity concern because the base stock of the oil is known to thermally degrade when exposed to extreme temperatures. Combine this with the known design fault in engine oil seals and you have the perfect conditions for low-level oil leakage that can expose passengers and crew to toxic fumes through the unfiltered air they are breathing.

As highlighted in the recently published Australian Civil Aviation Safety Authority—CASA—report:

“Exposure to … fumes and vapours can result in acute short-term symptoms”.

The report stated that the organophosphate family of TCP includes TOCP, which is a known substance in engine oils and can cause adverse health effects. In some individuals, long-term disability and forced retirement have resulted from long-term exposure. Pilots and air crew are particularly vulnerable.

It was also proven in the 1950s that other parts of the TCP family in the oil were even more toxic than TOCP, and these were later acknowledged to be in the oil at far greater levels than TOCP. Even more concerning is the recent research undertaken by the University of Washington, which has found that the entire family of TCP chemicals is toxic. I am sure that I do not need to remind your Lordships that organophosphates are neurotoxins—also commonly known as nerve agents. A small ongoing study undertaken at the University of Nebraska has recently published an astonishing finding that 50% of airline passengers tested positive to exposure to TOCP. This was one flight only with a wide spectrum of people on board—it could have been you or me, or a member of our families. There have been many reports of contaminated air incidents for many different airlines. I can provide details if any noble Lord is interested.

A report from the German air accident investigation bureau, the BFU, showed a serious incident late in 2011 in which a Boeing 737 co-pilot was partially

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incapacitated shortly after take-off and again on descent after smelling a pungent smell. Blood tests undertaken at the University of Nebraska found,

“that the blood sample (was) positive for exposure to TOCP”.

Recent PhD findings by Dr Susan Michaelis, specifically investigating this issue, found that 32% of the UK pilots in the survey population experienced medium to long-term ill health, 44% reported short-term effects and 13% experienced such chronic ill health that they were no longer able to fly. What we have here are threats to flight safety combined with a public health issue that can no longer be ignored.

The United States Air Force’s newest fighter aircraft has been having major problems with the oxygen system, with pilots reporting a range of hypoxic-like physiological symptoms. With a growing number of in-flight incidents, the United States Air Force grounded its F22 fleet for several months from May until September 2011. Several investigations failed to find the root cause of the problem and the US Secretary of State for Defence recently limited the aircraft’s operational capabilities and required NASA to resolve the issue. The F22 on-board oxygen-generating system takes some of its supply from the bleed-air system, and contaminated bleed air is one of the two issues considered to be the potential cause of the problem.

While attention is often focused on certain aircraft types, such as the BAe 146 and the Boeing 757, in fact the bleed-air system suffers from a flawed design affecting all aircraft using bleed air to supply cabin air for breathing. These fume events are alarming, both in their severity and their frequency. However, many sources—including Dr Susan Michaelis, the European Aviation Safety Agency and the Federal Aviation Administration in the US—have shown that these dangerous events are actually being underreported. What we have is a failed reporting system.

A survey for BALPA undertaken in 2001 and later published in a leading occupational health journal showed that less than 4% of the contaminated air events experienced by pilots in aircraft were recorded on the CAA mandatory occurrence report database. Pilots and cabin crew are too often unaware of, or complacent about, the health and safety implications and come from a culture that accepts fume smells as normal. Worse still, too many are too frightened to report such incidents for fear of losing their jobs. They are aware of the commercial pressure on airlines as, once a defect such as contaminated air is reported, it must be investigated before the aircraft can fly again. I am aware that DHL instructed its pilots not to report selected fume events, confirmed by the CAA in the House of Commons, because these are “acceptable”. This is in direct contradiction of European regulation 859/2008, which states that incidents that could endanger aircraft safety should be reported to the regulator and recorded in the aircraft technical log. Furthermore, European Directive 2003/42/EC requires all suspected oil fume or contaminated air events to be reported to the national authority. I know that the Minister is aware of this because he has given me that answer in reply to a Written Question.

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Pilots can also be reluctant to report any symptoms experienced for fear of exposing themselves to a medical that could, ultimately, lead to their licence to fly being revoked. This is acknowledged by the Department for Transport, which notes in its FAQs on cabin air quality that a UK study is unlikely to be successful as,

“pilots … would be legally obliged to report any health impairments found ... to the CAA, who licenses them”.

A recent example of two British Airways pilots who were cited by the airline to be filing a higher than average number of contaminated air reports illustrates this point: one had his medical certificate withdrawn after TCP was found in his blood, while the second pilot died in his mid-40s of a brain tumour after repeated exposures which were in many cases reported, but clearly ignored. The British Airways head doctor, however, is quoted in the House of Lords Science and Technology Committee’s 1st Report of Session 2007-08, entitled Air Travel and Health: an Update, as saying that he had,

“no evidence to suggest there is a serious medical problem”.

It is against this background of underreporting and an industry eager to avoid the commercial implications that the research by Cranfield was undertaken. In the House of Lords 2007 report, it was noted that as the original proposal was to sample “around 1,000 flights”, the size of sample offered only a,

“remote chance of capturing an event”,

if the incidence of contaminated air events is as low as the Government claim. In fact, the sample used was just 100 flights, yet the presence of TCP was detected in 23% of flights. Additionally, 38 reported fumes of which the majority were described as oil or oily-type smells. A mandatory occurrence report, or defect report, was not triggered on one single flight despite this being a requirement under the European directive and regulation. Clearly, the Government’s accepted estimate of the frequency of fume events is flawed and, despite government denials, this problem is being seriously underreported. Indeed, despite censuring the Government while in opposition for their dithering on air cabin quality, with secret studies behind closed doors, putting air crews and passengers at risk, when in office, the Secretary of State for Transport, Theresa Villiers, appears to have done an about-face. Ms Villiers’ interpretation of the Cranfield report was that,

“there was no evidence of pollutants occurring in cabin air at levels exceeding available health and safety standards and guidelines”.—[

Official Report

, 10/5/11; col.

WS37

.]

I was told in 2005 that there are no safe levels set for exposure to the mixture of substances from heated synthetic oils or for the organophosphate TCP. Peer reviewers for the Cranfield study used descriptors such as “very serious deficiency”, “very varying quality”, and “serious weaknesses in sampling”. Interestingly, earlier research by the same establishment on behalf of the Government concluded that because,

“current risk assessment practices are largely based on evaluating the toxicity of single chemicals at high doses”,

and because humans are exposed to a mixture of chemicals on a daily basis,

“there could be many uncertainties in the hazard assessment”,

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particularly related to low-level exposures. It would appear that we are making the science fit the policy, not the policy fit the science.

As long ago as 1997 I used the term “intellectual corruption” in a speech in your Lordships’ House on the subject of organophosphates. I was not in the least surprised to learn that the second and final Department for Transport-sponsored air-monitoring swab-sampling study by the Institute of Occupational Medicine, in Edinburgh, recently found TCP in aircraft at low levels, with estimated airborne concentrations of TOCP found to be very low.

Lord Trefgarne: My Lords, I apologise for interrupting the noble Countess, but if she could move one pace to her left, we could hear a little better what she is saying.

The Countess of Mar: I have a chest problem caused by organophosphates.

The Department for Transport publicly states that,

“it would be proper for DfT to be alerted of any findings out of the ordinary. Should that happen the DfT will consider what action might be appropriate to ensure that people can continue to fly without risk to their health”.

However, I must remind noble Lords that, as with the Cranfield study, no fume events were reported, and yet TCP at higher levels than TCP found elsewhere was detected, indicating that the substance originated from the aircraft. Of great concern is that the levels of the neurotoxic parts of the TCP stated to be in the oil are a direct contradiction of what Mobil advised in 2000. While ExxonMobil, formerly Mobil, the manufacturer of the oil, stated at the Australian Senate inquiry into this issue that the levels of the most toxic part of the TCP were over 600,000 times higher than the TOCP part, this Department for Transport-sponsored study has stated that the difference is only three times higher. One might ask who would know better. Making science fit the policy provides a wonderful excuse for inertia.

TCP has clearly been found in all aircraft surveyed. Controversially, the Institute of Occupational Medicine study states that there are government-set exposure standards available for the neurotoxic parts of TCP, but this is not the case. TCP as a whole and the most toxic parts do not have established exposure standards and, as we know, there are no exposure limits set for the mixture of ingredients in the aircraft environment. How can the researchers compare the enclosed environment of an airline cockpit with a normal office environment?

As well as organophosphates, there is a chemical known to be in the oil as an antioxidant at 1%, N-phenyl-alpha-naphthylamine, which is quite a mouthful, or PAN, which is much easier. It has an acknowledged contaminant as a by-product, beta-naphthylamine, or BNA. This is a prohibited schedule 1 category 1 carcinogen that has long been known to cause human bladder cancer. While oil certification standards used to say that suspected human carcinogens are prohibited in the oil, here we have a known human carcinogen in the oil as a contaminant totally ignored. The levels might be low, but repeatedly exposing people to human carcinogens is not acceptable. The new certification standards have removed this prohibition and simply

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say that all the regulations must be met. The other phrase that has been removed by the Civil Aviation Authority stated that,

“the lubricating oil shall have no adverse effect on the health of personnel when used for its intended purpose”.

Baroness Rawlings: My Lords, I remind the House that it has resolved in favour of shorter speeches and that the Companion recommends that Second Reading speeches be no longer than 15 minutes.

The Countess of Mar: My Lords, I am aware of that. I apologise to the House. I will now sit down.

6.08 pm

Lord Jenkin of Roding:The noble Countess reminded me of the time when I served on the first Select Committee that looked at air travel and health. Many of the concerns that she has voiced again this afternoon were before us in that committee. Our main concern was deep vein thrombosis, which we had a lot of very interesting evidence about. I hope she will forgive me if I do not follow her speech, but I will certainly read it with much interest.

I would like to say how grateful I am, and I am sure other noble Lords are too, for the very careful briefing we had before this debate from my noble friend Lord Attlee and his officials. They gave us a wealth of detailed information and a very good start on how we might debate this Bill.

Like others, I give a very general welcome to the main thrust of the Bill. My noble friend described its main features with great clarity and it is unnecessary for me to repeat that. However, I shall make one preliminary point before I turn to the Bill itself. It concerns the consolidation of legislation. I have been very critical over the years of the failure of successive Governments to embark on the consolidation of legislation, particularly legislation that is by reference to large numbers of prior Acts. Paragraph 28 of the Explanatory Notes makes the point very clearly:

All those Acts are being amended by this Bill. My noble friend will remember that at one of his briefings I asked why the opportunity was not taken to consolidate all this into a single piece of legislation and he agreed to look into that.

At the same time, I consulted our very excellent Library researchers, who, in their turn, consulted parliamentary counsel. They supplied me with a very full response with which, of course, I will not weary the House this afternoon—except for one brief paragraph:

“The question of whether consolidation is appropriate tends to be considered at two different stages. The first”—

that is the one with which I am concerned here—

“is when a Bill is being drafted. If the changes proposed to be made by a Bill are sufficiently extensive, rewriting the existing legislation with those changes may be appropriate”.

I was arguing with my noble friend that this was in fact precisely such a case. Parliamentary counsel went on to set out the reasons why, in his view, this Bill was not considered to warrant rewriting into existence a new,

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single Act. He made a fairly strong case, and I do not propose to pursue that, but I will make two general points.

Where there is complex, detailed, technical legislation, the practitioners who deal with this, and their lawyers, are thoroughly familiar with the legislation and all the terms, and can therefore read the new Bill and its amendments with full understanding straight away. For parliamentarians, however—I suspect that most of us do not begin to share that expertise—it is a very different process. Either we have to spend a great deal of time on researching the thing and getting all the earlier legislation, looking it all up and deciding how the Bill will impact it, or, as I suspect most of us do because we do not have that time, we rely on those who brief us. They are interested parties. They may not give us a fully objective view of what is happening. It therefore seems to me to be right that when a new Bill is being drafted and there might be a case for consolidation, that should be considered.

The second thing is the device known as the Keeling schedule. If you have an existing clause that is being substantially amended by a whole series of amendments, which may run to several pages of the Bill, it is extremely helpful if there can be a Keeling schedule—a schedule at the back of the Bill which illustrates what the Bill will look like with the amendments all incorporated. I hope that Governments will be ready to consider this. I have come fairly new to this legislation, and I confess to my noble friend and to the House that I in no way consider myself an expert in it. It would be a good deal easier if one could have either a consolidated Bill or a Keeling schedule. I hope that the House will forgive me for deviating from the general tenor of the debate to make that point.

In the rest of my remarks I will touch on three issues. There has already been mention of Clause 84, about the environmental effects of civil aviation. I declare an interest: I am a resident of Vauxhall. We are directly under the main westbound flight path into Heathrow and very conscious of not only the noise but the atmospheric pollution. My noble friend Lord Attlee supplied a very helpful note on air quality, pointing out all the existing legislation, both domestic Acts and regulations, and EU directives, in which all these things are firmly regulated. It was a long list; again, I will not weary the House. At the end of his note to me, my noble friend said:

“Clause 84 of the Civil Aviation Bill has been designed to require the CAA to publish such environmental information as it considers appropriate to draw passengers and freight owners into the Government’s wider efforts to address the environmental impact of aviation, and to raise awareness of the environmental effects of civil aviation in the UK and measures taken to mitigate its adverse effects”.

I am afraid that I do not understand what that means. I do not know what its effect is to be. One thing is perfectly clear: it is not intended that the CAA should become yet another environmental regulator. There are plenty of regulators of different sorts there already. I hope that my noble friend may be able to give us some explanation.

My second point concerns the duties imposed in the Bill on the CAA. It is, of course, the main economic regulator. Unlike other regulators, however, there appears

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to be no explicit requirement that it should act efficiently. There is no efficiency or proportionality objective in this. I have to ask my noble friend, “Why not?”. Every other regulator—all the other regulators—have requirements to act efficiently and proportionately. Why not the CAA? It seems to me that this might be the subject of not only an amendment but, as the noble Lord, Lord Davies, said, audit by the National Audit Office. Why not? The Government’s argument as I have understood it and as it was advanced in the other place is to say, “Well, this is not a government body. It is not like a government department”. But it is a statutory regulator and it is entirely appropriate that its efficiency should be audited by the National Audit Office. I get the impression, which others have had, that over the years the Department for Transport has not put efficiency of the CAA at a very high level. It has had a low priority. The Bill seems to be an opportunity to put it right.